Book 

PRESENTED BY 




Manager of the Wall Street Journal, Boston 
News Bureau, and Philadelphia News Bureau 



THE MEXICAN PROBLEM 
THE AUDACIOUS WAR 

TWENTY-EIGHT ESSAYS ON THE FEDERAL 
RESERVE ACT 



THE MEXICAN PROBLEM 



I 



THE MEXICAN 
PROBLEM 

By 

CLARENCE W. BARRON 

WITH INTRODUCTION BY 
TALCOTT WILLIAMS, LL.D. 




BOSTON AND NEW YORK 
HOUGHTON MIFFLIN COMPANY 

1917 



COPYRIGHT, I917, BY CLARENCE W. BARRON 
ALL RIGHTS RESERVED 



Published July IQ17 



^'A AMERICA LOCA" 

By SANTOS CHOCANO 

Peruvian, and Colonel in the Constitutionalist Army in Mexico 
{Late 1913) 

Peoples tumultuous. Feverish countrysides. 
Latin America, sunstruck and mad. 

(Prehistoric) 

Empires decked in the pomp of the warrior, blinded with 
luxury, deafened by sound. 

Stolid priests hacking out entrails and viscera — wild 
sacrifices to Gods of the mound. 

Martinet masters who drag out the hours in low sensuali- 
ties foreign to Love, 

Fatuous peoples all, like to their posts: heartless, whom 
only their fancies can move. 

(1520) 

Then arrives Spain with her cross and her sorrows, after 

her centuries seven of strife. 
Phantomhke multitudes (fair gods on horses) lay waste 

the Andes and strip them of life. 
Pizarro and Almagro cross their keen rapiers in fratricide 

strife that runs on till to-day — 
Hernan Cortez in the arms of Marina, mingles two bloods 

that are marked for decay. 
Offspring, a Gryphon; futile, insane — 
Eagle of feather, and lion of mane. 
Moorish depression comes out of the desert, clinging all 

time to the strange Spanish horse. 
Wailing, its sadness finds echo in Andes, mountains now 

silent and dumb with remorse. 



vi X AMERICA LOCA 

Back of the priest and his furious ritual, Inquisitorial phan- 
toms arise. 

Then, amid suffering, hunger and misery, flourishes Caste, 
built on terror and lies. 

(1580) 

Fray de las Casas by mad liberation loads on America 

burdens more great; 
Blood of the African now is commingled with that of the 

Gryphon, the curse of the State. 
This new decadence gives flowers anaemic, rich in their 

color, but odorless, stale; 
Women inspiring but sensual agonies; bards who in all 

but their fantasies fail. 

(1520-1810) 

Cycles of history reading like fairy tales; viceregal bril- 
liance of color and tone. 

O the adventures of silvery eventides ! Silken rope-ladder 
and Moorish halcon — 

Falsest of vows given — furtivest coquetry — heads nod- 
ding "Yes" to the tryst of the slayer — 

Swords sacrilegiously hiss from their sheathes in the very 
Cathedral and break off the prayer. 
All the vile elegance, then of Don Juan -r— 
Piety, decency, sanity, gone. 

(1810) 

Prophets, self-styled, raise the grito of Liberty. Over one 
century, lost are their cries. 

(1913) 

Comes, now, this meaningless, bloodletting orgy, from 
which our Lord God turns his pitying eyes. 
Peoples tumultuous. Lands of hot fever. 
Latin America, sunstruck and mad. 



FOREWORD 



This old globe is now belted with battle, in the 
greatest war that ever was or ever can be, to 
settle the problem of the brotherhood of man 
and of nations. 

When the smoke shall have cleared away, 
there will be a new day for the whole world, and 
a new meaning to Christian brotherhood, as 
there will be a brotherhood of nations for the 
first time in human history. 

In the future, national disorder must not be 
allowed anywhere in the world, for it leads to 
international disorder. 

The idea that Mexico is a land to be exploited 
by foreign princes passed away with Maximilian. 
The idea that it is to be exploited for the bene- 
fit of the United States must soon go by the 
boards, if it has not already gone. 

What is wanted is a clear path to extend help 
to Mexico — Mexico in its normal disorder, 
moral, social, financial, and political. 

As a student of the war and human progress, 
I went to Mexico to study the oil situation. I 
came back with something more important — 



viii 



FOREWORD 



"The Mexican Problem." Seeking its solution, 
where I had failed to find it in railroad, agricul- 
tural, or mining development, I found it in oil, 
because oil at the seacoast could give develop- 
ment from high wages without making sudden 
upset of the economic structure of the country. 

The United States had the first Mexican prob- 
lem when it acquired from Mexico the Pacific 
Coast. It found the solution in gold; "gold at 
foot of tree," in the river-beds and banks and 
valley^. Gold paid high wages to him who could 
wash it out. It returned high wages for supplies. 
It invited roads across the continent, knitting 
this old Mexican territory into civilization and 
the Union. 

The solution was Business with a big B. Agri- 
culture followed. Agriculture is not business. 
Agriculture is just existence. Business is ex- 
panding wages all around, — wages to labor, 
wages to capital; incentive to labor to accumu- 
lation, to luxury — luxury of freedom in body 
and mind — freedom to move the body from 
place to place and exercise the mind by human 
touch and contact! 

Economic production is production in quan- 
tity. Exchange of surplus follows. This is com- 
merce. But the fruit of commerce must not be 



FOREWORD 



IX 



wholly sordid accumulation. There must be 
fruitage and interchanged ideas and customs. 
There must follow mental development. 

Man if alone on the ground is below the brute. 
He is slave to the soil, which will yield him food 
only by the sweat of his brow. Then he must 
store it and cook it and clothe and shelter him- 
self. Nature clothes and shelters all other ani- 
mals and satisfies their taste with raw food. 
Why so cruel to man.? Only to be kind. 

Man must work. God works; angels work; 
devils work. There is no redemption for man, 
there is no progress for man or woman, except 
by labor — labor of heart, mind and hand. La- 
bor of the hand must be first; it purifies the 
blood coursing through brain and heart. Labor 
of the mind must follow that the hand may be 
directed; and labor of the heart must come in 
that hand and mind, by commerce and thought, 
may rightly touch its fellow. Only thus mutu- 
ally can there be health, help, and progress. 

No other animal has luxury, better food, or 
better shelter, whether there are thousands or 
millions more. But man may have progress by 
every other man. The more thousands the bet- 
ter each may be, and the more millions in hu- 
manity the greater and the more important the 



X 



FOREWORD 



individual man. Negative this proposition and 
the universe of man, of humanity, is ended. 

All other animals in pairs, families, or groups 
may be independent; men and likewise nations 
never can be. The chick chips its shell and in- 
stantly picks its food. Man must be led and 
taught. Animals have instinct. Men are denied 
it that they may know their fellow men. 

Independence, individually and nationally, is 
passing away. The inventions, the mechanism, 
the arts, for man's progress are all here. The 
way is now open. Human slavery, serfdom, 
peonage, are passing. Democracy is rising. The 
last great struggle is on and fourteen nations and 
forty problems are in it. But it is all one, — hu- 
man freedom that man may know his fellow and 
that mutual helpfulness may arise, individu- 
ally, collectively, nationally. 

Independence Day must take on a new mean- 
ing. National independence is hereafter pos- 
sible only by national interdependence. 

America was opened in the desire for mental 
freedom. Here was born political freedom, des- 
tined to encircle the world in little more than a 
hundred years. Here, too, were struck down the 
shackles from human hands laboring in slavery. 
From freedom of hand and mind America must 



FOREWORD 



xi 



go forward, is going forward, in freedom, with 
heart pulsating for universal political freedom. 

Human liberty can be maintained on this 
planet only by coordination of hand, of mind, 
of heart. 

The heart of America is now expanding, east, 
west, and north; Japan and Australia, west; 
Canada and the British Isles to the north; 
France, Italy, Russia, our Allies, east! Can we 
forget Mexico, our nearest brother south .^^ And 
she has so much to give us; fruit of the tropics, 
mineral and oil, wealth of a continent compressed 
into an isthmus, capacity for the happy, health- 
ful, helpful labor of, not fifteen million, but fifty 
million people! And we so much to give her, 
the fruit of our political, social, mental, and 
machinery progress; our arts, chemistry, and 
financial and commercial systems! Of natural 
wealth she has abundance. Of helping hands, 
kindly direction, and organization she has woe- 
ful need. And who is neighbor to him that hath 
need? 

After studying on both sides of the Atlantic 
the foundation causes for the war beginning in 
1914, 1 presented the economic truth in The Au- 
daciousrWar: tariff causes, desire for territory and 



xii 



FOREWORD 



spheres of influence, dominion of overland and 
water routes that trade might expand; lack of 
national morality, and "The Will to Power." 
I thought I knew and understood it all. 

Late in 1916 I dropped in upon Dr. Talcott 
Williams, as he spoke at the civic forum in 
Brookline, Massachusetts. I wanted to get his 
measure and divine what line of talent he might 
be turning out at Columbia for financial jour- 
nalism. To my astonishment I got a new angle 
from which to view my own ignorance as to the 
causes of modern wars. I had thought that, 
while economic conditions were basal under Ger- 
many's most audacious war and Russia's long- 
continued preparation for defense, certainly race 
and religion were at the root of troubles in the 
Balkans, in Turkey, and the Far East. But here 
again was the everlasting "bread-and-butter 
problem" or bread, even without butter, prob- 
lem. 

Dr. Williams showed from first-hand knowl- 
edge, and fifty years' reflection thereon, that 
our boasted Christian civilization, whatever it 
might be in its endings, was in its beginnings 
the disrupter of states and nations; that where 
villages and communities in the Balkans, in Tur- 
key, in Africa, and in the Far East had existed 



FOREWORD 



xiii 



in comparative peace Tor centuries and had their 
parchment records and title deeds older than 
any in modern Europe, their whole economic 
bread-and-butter fabric had been upset by goods 
"made in Germany"; cheaper manufactures 
from Vienna; the Armenian had let in the Chris- 
tian banker and out went the home-current wares 
to foreign markets, while back came the foreign 
goods destroying local hand industries, with no 
economic substitution giving local employment. 
The Mohammedan traced the trade connection 
and started to kill the Armenians, whose Chris- 
tian friends had taken away their livelihood. 
Vienna and Berlin goods also upset the business 
base in the Balkans. The people could not pay 
the Turkish tax exactions. On came the lash ; and 
Germany found profit in selling the guns that 
responded. The outside world opened Man- 
churia, and where peace had reigned for hun- 
dreds of years nobody had since been able to 
maintain law or order. The Boxer Rebellion was 
a similar economic protest. 

There was only one possible remedy. The old 
order could not be put back. The nations must 
unite and go forward. They must insure develop- 
ment by organization, capital, and modern ma- 
chinery, which could exist only with courts of 



xiv 



FOREWORD 



justice enforcing laws, order, and contracts. No 
other route was visible for either national or in- 
ternational peace. 

When the demand became emphatic that my 
articles on Mexico, its oil fields, and its so- 
cial, political, and economic problems take book 
form, I naturally turned to Dr. Williams to ask 
if he would set this forth in a preface with the 
conclusions he had reached for the problem 
Mexico presents to-day before the world. 

C. W. Barron 

Boston, July ^ 1917 



PREFACE 



These articles on the "Mexican Problem," by 
Mr. C. W. Barron, are to my mind a clear 
and wise economic picture of Mexico, beyond 
any others that I have read — and there is very 
little of the recent literature of Mexico which 
I have not read or examined. 

Not one so grasps the clear, strong fact that 
Mexico is a hell on earth because Mexico has no 
law, save here and there for the brief season 
that some man keeps law and order to feed his 
own ambition to be an irresponsible ruler and 
possess present power and the possibility of 
future wealth. 

It is forty years, to a few weeks, since, as the 
correspondent of the New York Sun at Wash- 
ington, I walked one night into the house of the 
Mexican Minister at Washington, and told him 
— he had n't had the final news — that all was 
over with Lerda, the new successor of Juarez, 
who had sent him to Washington, and that Diaz 
was in control. I saw once more the most bitter 
sorrow, the most bitter pang of hopeless grief a 
man's face can mirror — despair for the future of 



xvi 



PREFACE 



one's owil land. In my life I have seen this look 
in the face of Hungarian, Italian, Pole, Cuban, 
through a long list of lands, down to a Mexican 
on the day I write these lines. 

In the forty years since I saw Senor Mariscal 
grip the arms of his chair, his knuckles whitening 
and his dark face turning a paling gray, I have 
never in all the many pages I have written on 
Mexico, and many another troubled land, had a 
shadow of doubt that Mexico would be where 
Mexico is to-day, as these letters tell, with car- 
tridges for currency, because my boyhood and 
the dawning fact, thought, and writing which led 
to journalism were passed in southern Turkey 
between the Tigris and Euphrates, where the 
grim problem, which has wrapped the world in 
universal war, was at its beginning of the mani- 
fold hopes which have left but ashes. 

I was a missionary's son and my father, the 
Reverend W. F. Williams, sent forth by the 
A.B.C.F.M., had that unusual thing in a mis- 
sionary, an engineer's training with the knowl- 
edge of the mineralogist. The wide world was 
full of the rosy belief that, as in the United 
States and in Europe west of the Vistula, the 
economic basis of life was visibly rising like a 
new continent of human cheer and happiness, 



PREFACE 



xvii 



lifted by the forces of invention, steam power, 
and individual initiative, so all the world was to 
rise in like manner and measure. When in our 
long rides over the mountains which rim Meso- 
potamia north and east, whose valleys feed its 
boundary rivers, boy-like, I brought him a split 
pebble of malachite, the rhomb of carbonate 
of iron, the shining black cubes of galena, the 
short staple of a cotton boll borne breast high as 
we camped by a rushing stream, and he worked 
out its possible water power, or I took lessons at 
a village loom — he was prophesying the eco- 
nomic expansion to come. I do no despite to 
his flaming zeal for souls when I record that I 
never saw his face beam as when he taught one of 
his converts how to make sulphuric acid with the 
unmined sulphur deposit of Mosul, and the man 
improved on the process in lire's Dictionary, 
that compend of fifty years ago. 

The copper and the lead, he pointed out to me, 
the oil which rainbowed some streams on what is 
now the edge of the Kerkuk oil fields, are still 
undeveloped. This convert's tiny plant was 
stopped because it might lead to the easier 
making of explosives. But the good man's two 
sons are thriving business men — not in Mosul 
opposite Nineveh, but in Providence, Rhode 



xviii 



PREFACE 



Island. My father's economic vision has never 
taken soHd shape. Like visions, the world over, 
have been blasted. Why.^^ Because economic 
development necessarily rests on courts that 
enforce contracts and on order that makes sav- 
ings safe and provides better currency than 
cartridges, Mexico's popular legal tender to- 
day. Credits are only possible when contracts 
are enforced. Men will work with industry 
only where wages and property are protected. 
See how Mr. Barron describes the fashion in 
which the brief and uncertain economic protec- 
tion of an American plant has turned the peon 
into a steady oil-producer, self-directed, in a 
great and complex plant. 

If there are no courts that men can trust, there 
can be no credits or contracts. If these are not, 
neither capital nor wages come. Once, in the 
seventeenth and eighteenth century, even for a 
third of the nineteenth century, before steam on 
sea and land swept space aside, it was possible in 
isolation for some industrial community to gather 
strength, as in islanded England or in early or- 
ganized France, and this development gave 
strength and power to the English King's Bench 
writ and to the French King's " Parlement." 

Apart, China had, a century ago, a sound in- 



PREFACE 



xix 



dustrial system, narrow but stable, with a popu- 
lation overcrowded on the coast, but possessing 
in the interior peace and comfort, as Abbe Hue 
has testified. Alone, this development might 
have gone on. When steam brought English and 
American competition, China would have reor- 
ganized its industrial system if it had had courts 
and a judicial system possessing integrity and an 
eflficient government to enforce judicial decrees; 
but competition destroyed its industries, and the 
absence of the foundation of all economic sys- 
tems, justice, prevented China from advancing. 
First, in the south of China, earliest affected by 
European competition, came the Tai Ping Re- 
bellion, and the new European arms of precision 
gave the central tyranny of the Manchu a new 
power. Later, North China broke out in the 
Boxer revolt, economic in origin. For fifteen 
years past, the interior has been aflame, rising 
first where the great rivers bring closer European 
trade. China is to-day a derelict, a hulk adrift 
on the ocean of history, where it has weathered 
so many storms, its industries, two centuries 
ago giving lessons to Europe, to-day deterio- 
rated or destroyed. 

This is the history of all Asia and of all North 
Africa, of much of Latin America. So long as the 



XX 



PREFACE 



Turkish Sultan and the Moslem commonalty 
had the same arms, despotism could not go more 
than so far. When the Turkish army, a century 
ago, was new-armed and organized on the Euro- 
pean model, naught could stay the despotism of 
Constantinople. The rugs of Anatolia and the 
wares of Kutaiyeh, ninety years ago the best 
faience of the West, have fallen from old stand- 
ards. So with the solid colors of Peking wares, 
and the porcelains of the interior. Persia in the 
last fifty years has seen the art of four centuries 
cease as all its great caravan roads fell into dis- 
order and the caravans carried European goods 
to the undoing of native industries unable to 
develop for lack of courts. 

This has been a world movement. The inexo- 
rable principle that you cannot build a sound eco- 
nomic structure unless credit and contracts are 
sustained by courts that can be trusted, works 
as pitilessly as the attraction of gravitation on 
the bowing wall and the tottering fence, the 
arch of untempered mortar and the door jambs 
whose sill is heaved by frost. Sixty years ago I 
saw the process beginning in Turkey, first on the 
coast, later in the interior. Thirty years ago I 
saw the same forces at work in Morocco, in the 
mediaeval capital of Fez, whose old Andalusian 



PREFACE 



XXI 



potters and patterns were being ruined by Ger- 
man crockery. 

Latin America has faced the same drastic 
pressure. A century ago all the world, when 
Canning called a new world into being to redress 
the balance of the old, looked to see the economic 
development of the revolted colonies of Spain 
and Portugal. Bad as Spanish administration 
was and relentless as was the censorship of 
the Inquisition, the printing-presses of Mexico 
turned out, relative to the mechanic art of the 
day, better work two hundred years ago than 
to-day. It is the older pottery of Mexico to 
which one turns for the far-flung influence of 
the faience of Spain fashioned out of the light 
volcanic clays of Mexico. It is not the recent 
edifices of Mexico our architects study to give 
us what we call Mission" architecture. Let 
Courts be absent and justice dubious, and the 
sure end of the investment of $1,000,000,000 
which Mr. Barron sketches was predetermined. 
When "Boston people had great hopes of traflSc 
in the Mexican Central line they built from El 
Paso to connect with the City of Mexico," they 
were themselves so familiar with the courts of 
Massachusetts that they looked on the justice 
men trust as a normal natural product of so- 



xxii 



PREFACE 



ciety. They forgot that rails must rest on more 
than rock ballast to be safe for profits. 

Cuba, under the Piatt Amendment, is secure 
and produces, year after year, a sugar crop nearly 
treble the best of the Spanish past, with ris- 
ing wages because we insisted on order, courts 
that enforced contracts, and a sanitation which 
excluded pestilence. Economic prosperity, rail- 
roads that pay dividends, factories whose prod- 
ucts meet competition, and a growing popula- 
tion can only come where courts are justly trusted 
and enforce contracts; when public health and a 
low death-rate maintain the vigor of the laborer, 
and his life, his property, and the schooling of his 
children are protected by a sound and efficient ad- 
ministration. Let these be absent and rule will 
become a gamble for power and money, men will 
buy concessions first and protection for them 
later, perennial disease will sap industry, and you 
can neither secure capital from abroad nor pro- 
vide labor at home. 

Japan, islanded and long able to shut out for- 
eign competition, first by a policy of general ex- 
clusion and later by adroit internal administra- 
tion, was able to reorganize its industries before 
they were sapped and destroyed. Its ruling class 
created a new judicial system which commanded 



PREFACE 



xxiii 



such respect that exterritoriality and its courts 
were aboHshed at the opening of this century and 
native and foreigner trusted to the same justice. 
In other Asiatic lands special consular courts give 
the foreign merchant a standing advantage which 
destroys native credit and paralyzes native en- 
terprise. Japan is a signal proof of the way an 
Asiatic land, if it be for a season protected, can 
reorganize its industry and create stable condi- 
tions out of which a new system can come, safe- 
guarded and fostered by public order, courts 
creating confidence, and efficient sanitation. 

It is no answer to say that the Japanese have 
special powers and a personal aptitude. Ask any 
man who knows the Far East as to the personal 
credit of Chinese and Japanese. Compare Per- 
sian and Japanese art when both were at work 
under similar conditions in the seventeenth cen- 
tury. I have known, boy and man, closely and 
intimately, a wide range of human beings. I have 
had at my table and been honored by the close 
personal friendship of men black, yellow, red, 
white, and many shades between. The Near East 
I know as do only those who speak its tongues, 
have known it in childhood, and mature years, 
read its literature, thrill to the genius of its va- 
rious arts, and have the open heart and mind for 



xxiv 



PREFACE 



its faiths. At bottom, men are alike. Human be- 
ings make Humanity. Under like conditions, all 
act alike. Give any land and any race a fair 
chance and it will be as others and not otherwise. 

But after old systems, industrial and econo- 
mic, are undermined and overthrown, this chance 
can only come by building anew under protected 
conditions. See how English courts are bringing 
India closer and closer to self-government. Where 
would Cuba be but for our aid.^^ Give Mexico 
protection for order, courts, contracts, industries, 
and sanitation for a brief space, — one, two, or 
three decades, and what is this span in the life 
of a nation .f^ — and the splendid qualities of the 
Mexican people would do the rest. Keep order, 
create courts, educate a generation, turn out 
typhus and tropical diseases which scourge the 
Mexican home (some of the worst maladies are 
not tropical), and the courage, the loyalty, the 
patient industry, the quick teachableness of the 
Mexican can be trusted to maintain what it se- 
cures under tutelage, and to add to it. 

Mexico is to-day like the great oil wells of 
which Mr. Barron gives so vivid a picture, a 
fathomless resource for the light and power of the 
world, and needing only the mechanism which 
will enable it to set a thousand keels and ten 



PREFACE 



XXV 



thousand wheels in motion and light milHons of 
happy homes. 

How can the necessary order, effective courts, 
and national sanitation be provided for such 
great ends of justice? 

The United States brought these things to 
Cuba and see the result, peace and prosperity 
without annexation and with complete autono- 
mous independence for the Cuban people. Give 
the Mexican people the same chance, the same 
opportunity, a like period in which new institu- 
tions, new courts, new security, new sanitation 
come into being, and Mexico will show the same 
marvel of abounding progress. 

The United States just a half -century ago 
saved Mexico from the foreign invader. To-day 
Mexico must be saved from the internal de- 
stroyer. One task was accomplished without 
invasion. The other may be. Accomplished it 
must be. Moral responsibilities know no bound- 
ary lines. 

Talcott Williams 

Columbia University 

New York July 1,1917 



CONTENTS 

I. The Contrast 1 

n. American Interests no Base of Disorder 15 

III. Business and not Politics can redeem 

Mexico 27 

IV. Who shall help the Engulfed People? . 39 
V. Why No Aid for Mexico? 52 

VI. The Financial Benefits of Disorder . . 60 

VII. The Law of Compensation .... 67 

VIII. The "Effectivos" in Mexico .... 77 

IX. Oil Expansion 86 

X. Pioneer Work Finished 94 

XI. Why the Pan-American Company controls 

Mexican Petroleum 104 

XII. Doheny — Lord of Oil 120 



I 



ILLUSTRATIONS 



A Petroleum Camp in Mexico . . . Frontispiece 

Clearing Jungle for Petroleum Camp ... 20 

Christmas Day at Ebano. Unveiling Statue of 
Juarez 24 

The Gusher Potrero 4, before being capped . 36 

Storage Reservoir at Potrero — 2,500,000 Bar- 
rels 48 

Some of the 55 ,000-Barrel Storage Tanks, Mexi- 
can Eagle Oil Company 48 

View of TuxPAjq-, showing Storage Tanks and 
Steamer loading Cargo of Mexican Oil from 
Deep-Sea Loading Lines 58 

A Barbecue with Americans waiting on the 
Mexicans 70 

Two British Destroyers — One running on Coal, 
the Other on Oil 88 

Peon Houses before Oil Development began 96 

Residences of Peons 100 

Near Tres Hermanos 124 

Huasteca Petroleum Compajsty supplying Natives 
WITH Food brought by its Tankers from the 
United States, during War Times in Mexico . 132 

Map showing Lands of Mexican Petroleum 
Company At end of hook 



THE MEXICAN PEOBLEM 



CHAPTER I 

THE CONTRAST 

Appeals in behalf of Mexico have been before 
the people of the United States for more than 
one generation. 

Fifty years ago the appeals were from re- 
turned missionaries collecting money to help 
spread truth and light before our fellow man 
and brother over our southern border. 

Nearly forty years ago came the appeal for 
railroads. The good people of the North, and 
especially of New England, responded with mil- 
lions and declared : " We think the investment 
will be profitable, but we take pleasure in the 
thought that the railroads will be the best mis- 
sionaries. They will open opportunities for mu- 
tual and profitable development in trade, com- 
merce, mining, and manufacturing. There is 
much that we can do for Mexico, and much 
that she can do for us." 

The nickels and dimes of my early savings 
that had not gone to the Mexican missionary in 



2 THE MEXICAN PROBLEM 



response to Bishop Butler's heart-moving ap- 
peals were now taken from the savings bank and 
subscribed for bonds of the Mexican Central and 
Sonora Railways — the one to open up the great 
tableland of Mexico from El Paso to Mexico City 
and the other to carry the Atchison development 
of the Southwest to the beautiful mountain- 
locked port of Guaymas on the Gulf of California. 
Here opened vistas for New England capital and 
California enterprise down the Pacific Coast and 
through the heart of Mexico. 

SOUTHERN CALIFORNIA AND MEXICO 

In conjunction with Thomas Nickerson, the 
great pioneer builder of the Atchison and the rail- 
roads of Mexico, I journeyed to California; and at 
San Diego listened to one of the best addresses 
I ever heard, and from a man who never made 
addresses. Thomas Nickerson told the Chamber 
of Commerce at San Diego that he was not in 
agreement with the Southern and Central Pacific 
people whom he had visited in San Francisco and 
who had declared that there was nothing in San 
Diego or Southern California except invalids, 

one-lungers," and bees, and that the only 
prospective traffic from the harbor of San Diego 
was a few boxes of honey in the comb. Nicker- 



SOUTHERN CALIFORNIA AND MEXICO 3 



son declared his faith and the faith of the people 
of New England in the development of Southern 
California and closed by saying that he was sure 
of one thing: that if the road did not pay, the 
people who had put in the money could afford to 
lose it. 

There was no such doubt regarding the rail- 
roads of Mexico. In Mexico were mines with 
long records of production, fertile soils, tropical 
fruits, millions of people. In Southern Califor- 
nia there were no mines, few people, and only 
sunshine and honey bees as a basis for American 
enterprise. 

Although Thomas Nickerson was well along in 
years, we took to the saddle and rode up through 
Temecula Canon and the Temescal Valley over 
the line of the proposed Southern California Rail- 
way and on to the irrigated gardens of Riverside, 
with not a house or habitation between that 
town and the seacoast, although sheep grazed 
peacefully in the broad valley of Temescal. 

A few days later I was in Sonora, journeying 
toward Guaymas. We made " Uncle Thomas," 
as we affectionately called him, a pallet of straw 
in the stable of the ranch of Jesus Maria, and 
then outside, before we said good-night to the 
stars and rolled up back to back in our blankets 



4 THE MEXICAN PROBLEM 



on buffalo robes, I interrogated the engineers, 
not only concerning mires and mining history, 
but as to how they knew the volume of water that 
might one day, in Southern California, seek to 
pass through that seventeen-mile narrow gorge 
known as the Temecula Canon. They explained 
in detail how they determined the watershed 
area in those hills and the probable rainfall and 
then built the bridges and tracks at elevations 
in the valley well above future waters. 

DISASTER AND RECOVERY 

Not long after our little party reached home 
the rainy season began in Southern California, 
and the beautiful valley where the sheep had 
been so peacefully grazing was a lake, several 
feet deep and twenty miles long; out of which 
roared through the Temecula Canon a river, 
twenty and forty feet deep, vomiting forth ties, 
spikes, rails, and bridges, as man's poison to be 
cast forth upon the plains by the seacoast. 

The California Southern Railroad was gone, 
but the energy of the white men who built it re- 
mained. More rails were ordered, a new loca- 
tion, or pass, through the mountains found, and 
to-day the Southern California is the bright gem 
of the great Atchison system. 



GREAT EXPECTATIONS 5 



In Sonora we shot blackbirds and jackrab- 
bits, where grasses waved high as cornfields and 
the hills showed mineral values. The people at 
Hermosillo and Guaymas welcomed us as open- 
ing for them and their country the opportunities 
of a broader civilization. The rails were already 
laid for forty miles from Guaymas, which has a 
harbor more beautiful than California's Golden 
Gate. 

GBEAT EXPECTATIONS 

A few days later we went out on the Mexican 
Central from El Paso to the end of the track, 
which was just then starting on its path toward 
the City of Mexico, to lift this great land of 
the Aztecs and its people into fellowship and 
commercial life with the "Big Brother" of the 
North. The future of Mexico seemed as clear 
as the sunshine, although Southern California 
seemed a doubtful proposition. 

Returning to Boston, I published as follows, 
February 15, 1882, thirty-five years ago : — 

No one realizes what government, or the ab- 
sence of government, can do for a people until 
he sees Mexico, in comparison with the United 
States. Arizona and the Southwest, upon an 
almost waterless and comparatively barren soil, 
are prosperous from extensive grazing and min- 



6 THE MEXICAN PROBLEM 



ing interests, while Sonora, just across the bor- 
der, far richer in water and soil and mineral, has 
slumbered for years, devastated by incursions of 
Indians from the North, and then rent with in- 
ternal political dissensions, yet all the while hop- 
ing for the morrow to bring forth peace and pros- 
perity. No wonder the Mexicans love the word 
manana, for in to-morrow has lain their hope for 
years. But Sonora and Mexico are rapidly pass- 
ing into a new day whence all that has been will 
be as yesterday, and to-morrow will be bright 
with promise. 

The world now touches the sunshine of 
Southern California, eating its sun-kissed 
oranges, its sun-dried figs, its new seedless rai- 
sins, and the fruit of its alligator pear trees, 
transplanted from Mexico. Its deep valleys are 
raising the finest cotton; its motor highways 
are jewels in the crown of a State promoting in- 
tercourse over wide reaches betwixt its peoples. 

HONEY AND THISTLES 

The honey of human bee life is in California. 
In Mexico are yet the thistle, the nettle, and 
the hornet, the prickly cactus, sheltering the 
serpent, the poisonous herb shading the centi- 
pede — and the political centipede. 

I was surprised a few years ago to be notified 
that the Mexican Central forty-year bonds, to 



RESTRICTED BUSINESS 7 

which I had so early subscribed, were coming 
due. They had been scaled down from seven 
per cent interest to five per cent, then to a lower 
rate, and now whatever has succeeded them is a 
wanderer in Europe with no return, and the 
property they are supposed to represent is slid- 
ing backward. Its rolling-stock goes into the 
mire, and bandits tear up the rails, shooting the 
soldiers of Carranza and looting and shooting 
the native and foreign passengers. 

Scarcely a day passes that reports do not 
reach my desk from personal and sometimes 
confidential sources, of banditry, looting, and 
shooting, concerning which not a line can be 
found in the general press of the day. The al- 
most daily occurrences in Mexico would be sen- 
sational and call for glaring headlines if the 
happenings were north of the Rio Grande; but 
nobody will buy a paper to read about lawless- 
ness in Mexico. 

RESTRICTED BUSINESS 

It is generally known that the copper mines 
and smelters are only partially operating in the 
north, that travel is nowhere safe in that country, 
and that only in the oil fields around Tampico 
and south is there any real business progress. 



8 THE MEXICAN PROBLEM 



Even at Tampico every oil refinery has this 
spring been closed down for a greater or less 
number of days, interfering with oil supplies 
now so necessary in the world's progress through 
war. 

It is difficult to place the blame as between 
I.W.W. agitators drawing pay from German 
agents and petty Mexico authorities, some of 
whom do and some of whom do not recognize 
any national authority. 

Washington and Mexico City do not want 
these disturbances reported; nor do the business 
interests dependent upon American credit, and 
whatever protection may be afforded Mexico, in- 
vite publicity concerning Mexican disturbances. 

Ask any director or official of a foreign enter- 
prise in Mexico concerning the situation and he 
will give evidence only behind locked doors or 
with the understanding that his statements are 
confidential and his company is not to be men- 
tioned. He knows that he is managing the prop- 
erty of others in a country where there is to-day 
no constitution and no law; but he dare not say 
so publicly, for there are several alleged consti- 
tutions in Mexico, many alleged laws, and very 
many decrees, and there is to-day the power 
to suspend every constitution, law and decree. 



1 



A SIMPLE PROPOSITION 9 



Taxation has become only a matter of pressure 
to get something from anybody who has it. 

A SIMPLE PROPOSITION 

Yet, aside from the question of order and jus- 
tice, Mexico is a simple proposition. The na- 
tional expenses are less than $100,000,000 Amer- 
ican gold, yet a little more than half must go to 
the national defense. The revenues have been 
but seventy-five per cent of the expenses, and 
because it never had any credit it never piled up 
any outside debt. Diaz not only built up Mex- 
ican foreign trade from $15,000,000 American 
gold to $250,000,000, but he built up the na- 
tional treasury from emptiness to $30,000,000 
American gold. 

More than thirty years ago John Bigelow 
warned us that, notwithstanding the apparent 
peace and prosperity in Mexico under Diaz, it 
was a republic only in name, a slumbering vol- 
cano with a government by gunpowder only. At 
that time I refuted many of Mr. Bigelow's er- 
rors in his citation of facts, but history proved 
his main indictment. The people of Mexico have 
never had a chance, and the moment Diaz at- 
tempted to broaden the governing base in Mexico 
he was overthrown. The people have ever since 



10 THE MEXICAN PROBLEM 



been ground between political and social theo- 
rists both in the United States and their own 
country. 

There are seventeen million people in Mexico 
— ten million pure Aztecs, five million of par- 
tially Spanish origin, and two million pure Span- 
ish and other foreigners. Where formerly it was 
estimated there were fifty thousand Americans 
there are not now five thousand. 

The fact that the Spanish invader married the 
Aztec woman is not the curse of Mexico. The 
curse of Mexico is the faith that might makes 
right. Every schoolboy has heard the phrase 
"Conquest of Mexico." The idea of conquests, 
nationally and individually, is so strongly rooted 
in the world that Europe is now bathed in blood 
to uproot it. 

THE RULE OF MIGHT 

When Dr. Dernberg, formerly Colonial Min- 
ister in Germany, was in New York after the 
breaking-out of the Great War, he tried to con- 
vince me of the injustice of denying to Germany 
the right of conquest in foreign parts. He said: 
" What did England do a hundred years ago? 
What have they all done.^^ Because Germany 
comes late into the family of nations, are we to 



GOVERNMENT BY JUSTICE 11 



be denied our part in conquering the earth, in the 
acquisition of new territory, in colonial empire?" 

The idea was so barbaric to my freeborn Amer- 
ican blood that I could only laugh at Dr. Dern- 
berg and refer him to the dark ages. Yet the only 
army in Europe that has ninety-nine per cent of 
its soldiers able to read and write supports the 
right of conquest and territorial expansion. Have 
not Paris and London within three years been 
promised as compensation to a fighting people, 
that they might possess them or hold for ransom.?^ 
What is the difference when Villa promises loot 
as compensation to those who will attack under 
his leadership.? Sound government is by char- 
acter and not by intellect. The redemption of 
Mexico can never be accomplished by conquest 
or loot. 

GOVERmiEOT BY JUSTICE 

India is taxing herself and fighting for Euro- 
pean justice because this alone has given her 
security where before in a hundred years a hun- 
dred different dynasties rose up and attempt- 
ed rule by might. That country was redeemed 
only when government by justice came in. 

It is said that between 1821 and 1868 more 
than fifty rulers attempted the government of 



12 THE MEXICAN PROBLEM 



Mexico. Mexico is too large a territory to be 
handled by legislative enactment from one city. 
Diaz himself never really ruled the whole of it. 
Mexico is largely composed of territories mis- 
named states. In these distant territories, of late, 
especially in the north, revolutions start and get 
under way before they can be reached or dealt 
with by the central authorities. 

A just and lawful government should be es- 
tablished in the heart of Mexico with insured 
safe connection with the seacoast. From this, 
groups of states can be knitted in and distant 
parts should be treated as Mexican territory 
until its people can be educated and trusted with 
local self-government and show capacity to deal 
with the larger problems of nationality. 

THE MEXICAN CHARACTER 

At the present time the larger part of the good 
people of Mexico are children who want to be in 
debt and at the same time care-free. They want 
to work laughing. If they cannot laugh as they 
work, fighting is the next best thing. They have 
no other understanding of a revolution than that 
it is a sporty lark. They are exactly in the stage 
of the American country boy who on attending 
a new school must first find out who among the 



DEBT AND CITIZENSHIP IS 



pupils can *^lick the teacher." If the teacher is 
the stronger — sometimes by moral force and 
sometimes by brute force ■ — there is order and 
discipline. But if the teacher enters a con- 
test and is downed, he is no longer head of that 
school and, if he is to remain, some " big boy " 
must keep law and order for him. 

On many a hacienda in Mexico, and over many 
years, a skirmish, even with pistols, between the 
manager and his peon workers was regarded as 
a proper lark. If the manager got the better of it, 
the belligerents went peacefully back to work 
and everybody was happy because the boss had 
sustained his position. 

Mexico is not a difficult proposition when once 
you understand the Mexican character. He is 
the same childlike, dependent, trusting fellow 
whether at work, play, or revolution. He is 
simply in need of a strong hdping hand. 

DEBT AND CITIZENSHIP 

The Mexican peon is not thirsting for land or 
rule. There never yet were twenty thousand 
votes cast in Mexico for a president. The ballot 
will not redeem the Mexican from the peonage 
system in which alone he has confidence. Sin- 
gular as it may appear, his independence and 



14 



THE MEXICAN PROBLEM 



his self-respect he finds in this system. If you 
try to give him financial independence, he is 
fearful and rebellious. He is afraid that you are 
going to discharge him; that he will lose his job 
without being transferred to another. 

In brief a Mexican peon in agriculture, or on a 
hacienda, is a self-sold slave. He will not accu- 
mulate and spend his money. He must borrow 
of his employer and spend; and when his money 
is gone he is contented and happy to work under 
debt. But if you deny him credit or try to get 
him out from under the debt system, he becomes 
suspicious, will not work, and loses his own self- 
respect; you have not trusted him, you have 
no confidence in him; you are not his real 
friend, and he would like to be transferred with 
his "account" to some other hacienda or em- 
ployer where his credit will be unquestioned. 

While the peonage system may be the safety 
of agricultural Mexico, it can never produce in- 
dependence, citizenship, and self-government. 

The redemption of Mexico must be from the 
invasion of business, forcing upon the natives — 
the good people of Mexico — technical train- 
ing, higher wages, bank accounts, financial in- 
dependence, and the rights of citizenship and 
accumulation. 



CHAPTER II 



AMERICAN INTERESTS NO BASE OF DISORDER 

The Mexican problem can be studied better at 
Tampico than elsewhere in Mexico. Here the 
civilization and business forces of Europe and 
America have opened the jungle and the prairie, 
tapped the greatest oil basin in the world, har- 
nessed it, piped it to the Gulf coast, and here 
light and enlightenment, work and wages, invite 
human development. Here is the American 
boom town of Mexico, grown to fifty thousand 
population, with asphalt-paved streets, business 
blocks, markets, and parks. 

Here in turn the warring factions of Mexico 
fight for the privilege of protecting and taxing 
the developing properties about Tampico. Here 
the new order meets the old. The native Mexican, 
more than two-thirds the population of the coun- 
try, gladly accepts the extended helping hand. 

The Anglo-Saxon, the European and the 
American, are welcome throughout Mexico. 
Gringo" is only a border term. 

What, then, is the Mexican problem.? 



16 THE MEXICAN PROBLEM 



It is the problem of one civilization and one 
order, one rule and procedure, in contact with 
another civilization, another order, procedure 
and morality. 

A WORLD PROBLEM 

This is the problem belting the world. It is 
the problem of China, it is the problem in 
Egypt, it is the whole of the southern-eastern 
question. It is the issue that blazes in northern 
Europe. 

Here the issue is complicated because the on- 
coming order finds not only one but two civiliza- 
tions already in the field and more or less in con- 
flict for four hundred years. 

Governments in Europe are breaking up. 
Governments in Mexico are one after another 
breaking down; but the breakdown in Mexico 
has no more relation in its causes to the United 
States than has the European war, as the facts 
when ultimately presented before the American 
people must clearly demonstrate. 

But it was not with any purpose to theorize on 
the Mexican problem that the writer took a trip 
across the country and the Gulf to Tampico and 
studied the resources of Mexico in the Tampico- 
Tuxpan oil field to get the facts of the existing 



THE AMERICAN PIONEER 17 



situation and note the factors springing there- 
from related to American investments. 

Tampico has a broader meaning in the Ameri- 
can investment field than is yet generally real- 
ized. The development of the gold fields of South 
Africa has been important, not because of the 
South African war costing England $1,200,000,- 
000, but because the output of South African 
gold affected the civilization and the economic 
and social order of the world. 

Vera Cruz, Mexico City, and the west coast of 
Mexico are to-day as Mexican as ever — both in 
order and disorder. But Tampico and Tuxpan 
are international and are basic in the economic 
and social progress of both Europe and America, 
and possibly of Asia. 

Here is the British naval oil base. Here, before 
the war, were the German experts studying the 
future relations of German commerce to the oil 
supply of the world, which later may center in 
Mexico. 

THE AMERICAN PIONEER 

American pioneers, however, were first in the 
field and American business talent and American 
capital have maintained leadership without gov- 
ernment invitation, support or even recognition. 



18 THE MEXICAN PROBLEM 



It is a popular misconception in the United 
States that the people of Mexico have been, are, 
or are about to be exploited in the interest of the 
Standard Oil refineries, the Guggenheim smelters, 
or the Hearst ranches. Nothing could be further 
from the facts as related to the present situation, 
although both in Texas and Mexico, Standard 
Oil interests attempted years ago to arrest the oil 
development. 

The wealth of the world is planetary wealth 
until it is lifted by human discovery, human 
forces, and human hands into human uses. The 
agricultural wealth of the world giving food to 
man is from the sun through the soil by labor. 
The mineral and oil wealth of the world is 
by human discovery, engineering, machinery, 
finance, and complex forms of human labor. Al- 
most universally have the nations of the earth 
recognized right by discovery in underground 
wealth, and thus invited its discovery and de- 
velopment. 

Under the administration of President Diaz 
Mexico was opened to the outside world, which 
was invited to pour in its talent, money, and skill 
to lift to the surface the undeveloped resources of 
the country, teach the unskilled labor of the land, 
and put Mexico, its people and its resources, 



THE AMERICAN PIONEER 19 



in the way of modern development and civili- 
zation. 

What are now the oil fields of Mexico were 
formerly the " bad lands " of the jungle and the 
plain. The black asphalt oozes softened the soil 
and enmeshed and swallowed up cattle, horses, 
and wild animals. They were in 1900, as they 
had been for nineteen hundred years, worse than 
valueless. 

Edward L. Doheny, American engineer-pros- 
pector, miner, and pioneer developer in the oil 
fields of Los Angeles, California, was more than 
millionaire, and so also was his partner Can- 
field, when they entered Mexico in 1900 to 
prospect for petroleum. They were not freeboot- 
ers, seeking conquest or the exploitation of 
people, laws, or government. They were looking 
to do in Mexico what they had done in Califor- 
nia and with their own fortunes lift values of this 
old planet to the surface, under Mexican laws, 
treaties, and customs and with the aid of Mexican 
labor. Diaz and Mexico had invited outside tal- 
ent and money; Boston money had built the 
railroad from Arizona to the port of Guaymas on 
the Gulf of California and from El Paso to the 
City of Mexico, with a branch to Tampico. 

Into the jungle from Tampico to Tuxpan 



20 THE MEXICAN PROBLEM 



went Dolieny and Canfield by foot and on horse- 
back. They located the oil seepages. They 
sought out the owners of the lands. First they 
bought 450,000 acres thirty-five miles west of 
Tampico and later 170,000 acres in various tracts 
south toward Tuxpan. They paid from sixty 
cents per acre upward and astonished the Mexi- 
can people by the prices paid for such unproduc- 
tive lands. They were advised against such large 
prices by the Mexican lawyers, landowners, and 
statesmen. 

But the Americans retorted that the price was 
immaterial if they found what they were after; 
they would not hesitate or haggle. The Mexicans 
named their own terms, took the cash and de- 
livered title deeds running back through gener- 
ations, some titles making a heavy volume. 

The Americans cleared the jungle and made it 
a ranch. They built blacksmith shops, ware- 
houses, water lines, and hospitals. They bored 
for oil, developed the Mexican Petroleum Com- 
pany, and brought forth the biggest oil gush- 
ers in the world. Pipe lines and railways pre- 
ceded and followed the gushers. British, Dutch, 
Waters-Pierce, and some Standard Oil and 
Southern Pacific interests came in, but the 
American interests stand at the head. 



NO DISPUTE WITH GOVERNMENT 21 



NO DISPUTE WITH THE GOVERNMENT 

Nowhere have these interests disputed with 
the government, or refused their due taxes or co- 
operation with the local and national authorities. 
The only complaint against them was that they 
raised wages from less than twenty cents a day 
to a minimum of one dollar a day and made 
native Mexicans into blacksmiths, carpenters, 
shipbuilders, and engineers at three dollars and 
fifty cents a day in gold. 

It has been a new economic era. It has been a 
development. It has not been a conquest or an 
exploitation either of peoples or of governments, 
and the same may be said of all the other inter- 
ests, British and American, in mining and in 
agriculture, in Mexico. 

The fighting in Mexico has not been with or 
concerning American or foreign interests. The 
fighting has been between local factions, leading 
families, political parties, the ins and the outs. 

The strife has been for the possession of the 
citadel and the reins of government at Mexico 
City. There has been danger to the American 
interests only by reason of their location at times 
between the conflicting forces, but neither the 
American nor the foreign interests have so much 



22 THE MEXICAN PROBLEM 

as possessed arms for their own defense. No 
guns are allowed on any of these oil properties 
nor are they desired. Their possession would be 
a menace, because they would be desired and 
fought for by the politically contending forces 
and the roving bands that at times overrun 
Mexico from north to south and east to west. 

TAMPICO HARBOR 

When a generation ago the Boston people 
ploughed the railroad line from Atchison to Santa 
Fe and across the great American desert into 
California, they had great hopes of traffic from 
the Mexican Central line they built from El 
Paso to connect with the City of Mexico, a thou- 
sand miles distant. They believed it would be a 
great feeder to the Atchison. 

In this they were disappointed, but they still 
had the courage to build a branch to Tampico, 
hoping therefrom to make a new port for the de- 
velopment of the interior of Mexico. They had 
no thought of oil and no other thought than the 
wealth of the great high plateau in the center of 
Mexico. 

For years the Atchison folders printed the 
Mexican lines almost as their own. To-day on 
the Atchison folders connections north even into 



TAMPICO HARBOR 23 



Canada may be traced, but Mexico is a foreign 
country upon which the railroads need not waste 
paper in maps or time-tables. A thumb-nail 
corner in the Santa Fe map shows Mexico, and 
on it from Mexico City to the Rio Grande on the 
coast is a wilderness broken only by the harbor 
of Tampico. 

To all American lines meeting at El Paso the 
business in and out of Mexico has been for more 
than thirty years a disappointment. 

It is now clear that the greatest development 
in Mexico may take place from the coast and 
through her oil wealth. From the Rio Grande to 
Tampico the Gulf coast of Mexico is largely an 
unpenetrated jungle, rich in natural resources 
and capable of maintaining a population of many 
millions. 

Tampico harbor is simply the mouth of the 
Panuco River and the city is nine kilometers from 
the jetties, which defend the river mouth from 
the lashings of the Gulf waves. Tampico is ca- 
pable of indefinite development as a port. It has 
a large water basin to the south and another to 
the northwest, while from near the mouth of the 
river runs a government canal almost due south, 
defended from the Gulf by a narrow strip of land. 
This Chijol Canal enters the great lagoon of 



24 THE MEXICAN PROBLEM 



Tamiahua, which is continued by another water- 
way near the coast almost to Tuxpan. There- 
fore, for almost the entire one hundred miles 
between Tampico and Tuxpan there is inland 
water transportation for barges and shallow 
steamers just inside the coast line. 

Between the Chijol Canal and the Panuco 
River are the termini of the Mexican Petroleum 
pipe lines "tank farm" and Tankville, with 
altogether one hundred and three tanks, each 
filled with 55,000 barrels of oil. There is also a 
storage basin carrying more than 800,000 barrels 
of oil. Here are the machine shops, carpenter 
shops, and shipbuilding plant, piers that will au- 
tomatically load the largest steamers in a few 
hours, and a topping plant to take the gasolene or 
distillate from the crude oil. About ten per cent 
of the oil is gasolene and its removal does not 
impair the fuel qualities of the ninety per cent 
remaining. 

Here also on the east side of the river are the 
Standard Oil and Royal Dutch works and a re- 
finery and topping plant of the Mexican Eagle 
Company. On the other side of the river are the 
Pierce Oil refinery, the railroad terminal, and a 
magnificent government wharf. 

The mouth of the river is being dredged by co- 



PICTURESQUE EBANO 25 



operation between the Carranza government in 
control at Tampico and the oil interests, more 
than a dozen American companies cooperating 
to advance the money, the same to be repaid 
from taxes on a part of the increase of their busi- 
ness. Under this arrangement the Mexican Eagle 
Company, Lord Cowdray's company, advances 
twenty-five per cent and the Mexican Petroleum 
Company thirty-three and one-third per cent. 

PICTURESQUE EBANO 

The first oil developments began at Ebano, 
thirty-five miles west on the railroad from Tam- 
pico. Here the Mexican Petroleum Company has 
now 450,000 acres bounded on the north by the 
Tamesin River, and reaching almost down to the 
Panuco River, the general direction of which is 
parallel with the Tamesin River. Here is the 
heaviest oil, while as one goes south the oil is 
lighter and increases in commercial value. 

Ebano is one of the most picturesque towns 
in Mexico, an American creation, of Mexican 
architecture, covering a beautiful mound rising 
nearly two hundred feet above the plain, now a 
fertile ranch, the whole reminding one of the 
beautiful Italian villages set on a hill; but 
ranch and hill were seventeen years ago a jungle 



26 THE MEXICAN PROBLEM 



thicket with no life but that of the panther, the 
serpent, the parrot, and all the other animal and 
bird life of the jungle. 

From this point the National Railways of 
Mexico are furnished their fuel oil. With the 
railroads working at their capacity in a settled 
country they would be consuming twelve thou- 
sand barrels a day, but at present less than six 
thousand barrels is taken and the proceeds are 
credited on the company's tax bill. The tax is 
about five cents per barrel for exported oil. 

Until Mexico has settled down, it is not worth 
while to dwell upon the oil or agricultural wealth 
or the few millions here first invested, for the 
wells farther south are abundantly sufllcient to 
fill four times the present pipe lines and four 
times the available ocean tonnage. 



CHAPTER III 



BUSINESS AND NOT POLITICS CAN REDEEM 
MEXICO 

The United States can never take its proper atti- 
tude in cooperative democracy toward its sister 
republic until two popular, yet absolutely false, 
impressions of Mexico are removed. These popu- 
lar fallacies are : — 

First, that the natural wealth of Mexico has 
furnished a base for contending business inter- 
ests from the United States to promote Mexican 
quarrels. 

Second, that the land question is at the bottom 
of the Mexican troubles. 

The writer must frankly confess that for many 
years he believed these popular superstitions, and 
only his recent trip into Mexico dissipated them. 

The history of the Standard Oil Company as 
popularly presented has been that of a record of 
oil monopoly checked intermittently by courts 
and legislatures, — a monopoly overriding indi- 
vidual and popular rights and promoting peace 
or war for financial ends. 



28 THE MEXICAN PROBLEM 



Suspicions concerning the Standard Oil Com- 
pany in Mexico have been prevalent on both 
sides of the Atlantic. 

Many timeS the representatives of American 
oil interests at Mexico have been interrogated at 
Washington as to their relations with the Stand- 
ard Oil Company, and each time the response has 
been emphatic that the Standard Oil Company 
was neither openly nor secretly promoting the oil 
development in Mexico or behind any important 
independent producing companies. 

THE POSITION OF THE STANDAED OIL COMPANY 

The fact is that the Standard Oil Company 
has aimed at a monopoly of markets, a monopoly 
of transportation, and a monopoly of refining. It 
has always avoided ownership in the producing 
field. The late H. H. Rogers used to declare that 
the Standard Oil Company wanted no more than 
an eighty-five per cent monopoly in oil; but that 
its fifteen per cent interest in the production 
was more than it desired in that line. The 
Standard Oil Company has prospected or mined 
for oil only where others could not be induced 
to take the risk. The hazard of mining the 
Standard Oil Company has always endeavored 
to avoid. 



STANDARD OIL COMPANY 29 



The Amalgamated Copper Company was a 
failure under Mr. Rogers because he was not a 
miner and hesitated to take a miner's risk in 
opening the Butte copper district at depth. 

The men who opened the Mexican oil terri- 
tory were prospectors and miners and never 
sought the manufacturing or distribution ends 
of the business. Even to-day E. L. Doheny both 
in California and in Mexico declares he prefers 
the profits of production on a large scale to the 
details of manufacturing or the business of re- 
tailing, which he regards as distinct fields from 
oil production. 

The Standard Oil people are buyers of oil at 
Tampico and are building a refining plant there 
to become larger buyers of oil, and they have 
some producing interests south of Tuxpan. The 
Pierce Oil Company also has a refinery at Tam- 
pico and the British, or Lord Cowdray, interests 
ship from both Tampico and Tuxpan and re- 
fine at Tampico and Tehuantepec. 

The Mexican Petroleum Company is the larg- 
est producing interest in Mexico, with a present 
production of fifty -five thousand barrels per day. 
The Cowdray interests are second with about 
thirty thousand barrels a day on present re- 
stricted shipping facilities. Other interests rep- 



30 THE MEXICAN PROBLEM 



resented at Tampico are the Pierce Oil Company 
and the Royal Dutch or Shell interests and 
the Standard Oil Company of New Jersey. The 
outlook is that the Shell interests will soon be 
the third largest producers. But the major in- 
terests of the Pierce Oil Company and the Stand- 
ard Oil companies here are in the refining of oil. 

A WORLD MAGNET IN MEXICO 

It is because of these interests, American and 
European, in the Tampico field, both as pro- 
ducers and refiners, and because such evidences 
of underground wealth can command the capital 
of both Europe and America and because petro- 
leum fuel is working revolutions on both land 
and sea, that the development, the regeneration, 
and the hope of Mexico and of the Mexican 
people must have their base at Tampico, and 
not in the commerce of Vera Cruz or the inland 
productions of Mexico, mineral or agricultural. 

No redivision of lands in Mexico, no partition 
of haciendas or ranches, can solve the problems 
of Mexico or bring her forward to the position 
she is entitled to occupy by reason of her natural 
wealth and millions of human hands ready for 
work. 

Land is cheap in Mexico and is to be had 



A WORLD MAGNET IN MEXICO 31 

almost for the asking, but of what use is an 
acre or a hundred acres to a peasant without 
plough, animal power, or machinery, and, above 
all, without transportation or near-by markets? 

In the oil regions of California, rich in soil and 
markets, the underground wealth is reckoned at 
just twenty times the value of the soil wealth. 

From Tampico to Tuxpan is a tropical jungle 
but not, as often assumed, a miasmatic marsh. 
It is a jungle of luxurious foliage over soil that 
can grow anything in the world; but where are 
the markets and where the incentives for the 
native population to labor 

The beginnings of markets, the beginnings of 
transportation, the beginnings of incentive, the 
beginnings of accumulation, are in the uncover- 
ing of large natural or planetary wealth. Out- 
side capital will take the risk for the prize, will 
employ the labor, will create the transportation, 
the markets, and the interchange of commodities 
that make foundations for modern civilization. 
Natural wealth outside the path of development 
has no value. The Mexican petroleum fields 
had absolutely no value in 1900 and, undevel- 
oped, will have the same value in two thousand 
years that they had two thousand years ago. 

To him who would study fundamentals, the 



32 THE MEXICAN PROBLEM 



future of Mexico is already on the map at 
Tampico because there is here exactly what 
European and American civilization are de- 
manding for the world's progress, and whatever 
comes, whether the development is by Great 
Britain or Germany or by North or South Amer- 
ica, the wealth that thence can give light and 
power to the world will never be surrendered 
back to the chemistry of Mother Earth. 

The writer traveled thirty-five miles west into 
the oil fields and ninety miles south - beside par- 
allel pipe lines carrying oil, gas, and water; vis- 
ited the terminals, machine shops, carpenter 
shops, tanks, reservoirs, and shipping wharves, 
and saw the Mexicans with work and wages 
never dreamed of haK a generation ago. 

THE CONTRAST 

Boston people put the Mexican Central Rail- 
road into Tampico more than thirty years ago, 
and between that railroad and the banks of the 
Panuco River are still the half-naked Mexican 
babies, the wan mothers, the listless boys and 
girls, without opportunity, and the fathers with- 
out ambition to keep in repair the roofs of their 
low huts. 

A dug-out cedar log for a canoe with a red 



FAITHFUL MEXICANS 33 



blanket for a sail is picturesque, but not indus- 
trially expansive. The fishing is good, and exist- 
ence calls for but little energy. On the other side 
of the river are well-dressed Mexican families 
with comfortable homes, pure water, electric 
lights, moving pictures, wages, and opportunity 
for more. There are great possibilities of savings 
in these wages and of personal development 
therefrom; but throughout all Mexico there is 
not yet a savings bank. 

The Mexicans are good workers when tools 
and instruction come to their hand. So far as 
operated, the railroad lines of the country and 
the railroad repair shops are manned entirely by 
Mexicans. There are several independent Tam- 
pico shipbuilding and repair yards all owned and 
operated by Mexican graduates from the repair 
plants of the Mexican Petroleum Company on 
the other side of the river. 

FAITHFUL MEXICANS 

When in 1913 all the Americans were called 
out of Mexico, the native employees of the 
Mexican Petroleum Company, who had been 
assisting in the pumping stations and in the 
shops, saw to it that never a stroke was missed, 
nor was there a barrel less oil produced, nor any 



34 THE MEXICAN PROBLEM 



damage or harm to the company's property 
entrusted entirely to its own faithful Mexican 
workmen. 

When in June, 1916, the military governor of 
Tampico declared war on the United States and 
the Mexican Petroleum Company took out nine 
hundred Americans on two oil steamship carriers 
and the yacht Casiana, again the pumps never 
missed a stroke and the Mexican employees in 
about ten days put 461,000 barrels of oil in the 
tanks and also loaded two steamers for export; 
nor was there any thought of interference or of 
attack upon the property. 

Superintendent Green declared that after such 
faithfulness the Mexicans should continue to 
run the pumps and the machinery. / 

It is no wonder, therefore, that the party of 
Americans visiting Tampico in March, 1917, 
were everywhere welcomed with smiles or that a 
Mexican youth in sandals, mistaking the writer 
for a company manager, applied in Spanish for 
work, declaring that he had a wife and babies 
and that he needed food and clothing. 

That is the need of Mexico to-day — oppor- 
tunity to labor, opportunity for the family, op- 
portunity for food, clothing, better shelter, and 
better social conditions. 



INTO THE JUNGLE SB 



And this is exactly what American and Euro- 
pean capital and organization have brought to 
Tampico, attracted by its underground wealth, 
and this is what will ultimately redeem Mexico 
and forward her people by industrial oppor- 
tunity. 

INTO THE JUNGLE 

Nowhere in the tropics can one make a more 
interesting trip than to take a swift launch or a 
lazy stern-wheel barge and at daybreak stir the 
flying-fish and the jungle parrots of the Chijol 
Canal, pass on through shallow Tamiahua Lake, 
where the waterfowls before their migration may 
be seen spread out in all directions for twenty 
miles, note the electric light of the oil pumping 
stations, contrasting with the distant dark moun- 
tain peaks, and glimpse through the jungle the 
cleared hillside fields where the British oil in- 
terests, represented by Lord Cowdray, have 
planted the mark of English thoroughness in 
field and building construction. 

The water trip now terminates sixty miles 
south at San Geronimo, but later may reach 
Tuxpan, forty miles beyond. Here at a small 
inlet dividing the British and American develop- 
ments you mount motor handcars and fly like 



36 THE MEXICAN PROBLEM 



the wind through the canebrake and the bamboo 
of the jungle up hill and down and around sharp 
curves. Before you can get your breath you are 
amid the oil derricks of several American and 
English companies drilling on their border lines 
as in Texas and California. 

But here the contests between contending in- 
terests must be sharper, for no man knows in this 
country to what extent at two thousand feet in 
depth a neighboring oil well may exhaust his 
land. 

The Mexican Petroleum Company would ap- 
pear to have the advantage at this point, as no 
other American company has yet a pipe line. 

MEXICAN GUSHERS 

Pausing before Chinampa Number 1, the oil 
was found bubbling up around the drill, and 
orders were given by Mr. Doheny to entertain 
the American party if possible on the return trip 
in the afternoon with the bringing in of the well. 
A few more strokes on the drill and the gas and 
oil bubbled higher, but it did not flow that day. 

In this entire territory there is no pumping of 
wells as in California. Every well flows or gushes. 
Two days later, or Friday, March 16, Chin- 
ampa Number 1 "came in" and flowed for two 




THE GUSHER POTRERO 4, BEFORE BEING CAPPED 



I 



MEXICAN GUSHERS 37 



and a half minutes over the crown pulley, eighty- 
two feet high. Then they shunted the flow into 
the pipe line and the later report was ten thou- 
sand barrels per day from this well, with expec- 
tation that she would later "drill herself in." 
This means that when cleared for action she 
might be a third great ■ well for the Mexican 
Petroleum Company with capacity of several 
times ten thousand barrels per day. 

As this is the one well in competitive territory, 
the supply at other wells of this company must 
be still further shut in to permit full flow here. 

On the hilltop, high above the surrounding 
country, blaze day and night twelve gigantic gas 
flames relieving the pressure on the famous 
Casiano well of the Mexican Petroleum Com- 
pany which is in the valley beyond, with beauti- 
ful surrounding hills, and probably geologically 
isolated in this oil country. 

You climb in and out of this valley by team 
or in saddle and a clearer picture one would go 
far to see — cultivated fields, neat houses, pump- 
ing machinery moving like clock-work, but set 
in a tropical fruit and flower garden. 

"Casiano Number 7" came in September 10, 
1910, at seventy-five thousand to eighty thou- 
sand barrels a day and is now shut down to 



38 THE MEXICAN PROBLEM 



twenty-five thousand barrels a day under two 
hundred and sixty-five pounds pressure; but 
more than double this amount could be taken 
from the well were there shipping facilities from 
Tampico. "Casiano .Number 6" was flowing 
fifteen thousand barrels a day when it was 
closed in a month before Number 7 came in. 

It is possibly immaterial from which well the 
Casiano district is tapped, for no man knows to 
what extent in this valley Number 7 is drawing 
from the territory of Number 6, as the geology 
in these oil fields is not analogous to anything 
else known on the continent. Number 7 cannot 
be shut in more closely without danger, for any 
increased restraint causes the ground to break 
forth with oil a few hundred feet distant. 

Nearly twenty miles farther south by the Mex- 
ican Petroleum Company's railway and pipe, 
water and gas lines is the greatest oil well in the 
world to-day, — Cerro Azul, which means "blue 
hill," and which "blew in" February 9, 1916, 
and shot 1,400,000 barrels of oil into the air 
before it could be capped. One half of this was 
saved by a quickly constructed reservoir. The 
column of oil measured six hundred feet, and 
when it was shut in the delivery was at the rate 
of more than 260,000 barrels per day. 



CHAPTER IV 



WHO SHALL HELP THE ENGULFED PEOPLE ? 

When you have traveled nearly twenty-five 
hundred miles by land and water to reach at 
Cerro Azul the greatest oil well in the world, 
you see in the jungle only a cleared field, near 
the center of which is a mound of earth not 
twenty feet high, set against "mountains of 
blue," and the only evidence of human interest 
is an ordinary pressure gauge embedded near 
the top of this earth mound. 

But you stand on the top of this little mound 
and feel the pulsation of something almost hu- 
man beneath your feet — a crater of energy that 
taxed the ingenuity of man for days to harness 
it and cap down a gas and oil pressure measur- 
ing above one thousand pounds per square inch, 
and flowing oil at a rate equaling about one 
quarter of the oil production of the whole world. 

POSSIBILITIES OF DEVELOPMENT 

One can but reflect that the Almighty per- 
mitted the tapping of his reservoirs of oil only 



40 THE MEXICAN PROBLEM 



when the whole world was coming into line to 
receive the benefits. 

The City of Mexico is one hundred and sev- 
enty miles distant southwest. With the coun- 
try at peace and holding the confidence of the 
credit markets of the world, an easily con- 
structed pipe line could be delivering daily sev- 
eral million cubic feet of gas in Mexico City for 
warmth, light and power to quickly obliterate 
the ravages of internal wars. But there the two 
million dollar gas plant is shut down after losing 
one hundred thousand dollars a year for four 
years, and the threat comes from the Carranza 
government that this plant will be confiscated 
unless it is put in operation. Confidence with 
credit is not commandeered overnight. Through- 
out the whole oil region, and for the safety of 
the country and its inhabitants, ten million 
cubic feet of gas are daily burned in high flam- 
ing torches. 

It is not what Mexico is now doing, but the 
world possibilities in it, that one may see and 
practically feel as he stands with his feet on the 
Cerro Azul mound of earth and notes the force 
beneath that is delivering into the pipe line 
twenty-five thousand barrels of oil per day and is 
pulsating to deliver ten times this amount. 



OIL VERSUS COAL 41 



The world now needs it as never before, and 
Mexico needs, as never before, the outside help 
that this magnet of wealth can bring to it. 

OIL VERSUS COAL 

The English have thoroughly experimented 
with fuel oil and demonstrated that, used in 
a Diesel engine, one ton of oil, or 6.8 barrels, 
does the work of six tons of coal; and the normal 
price in England is about five dollars per ton 
for each, although present war prices are nearly 
double. Burned under boilers three tons of oil 
equal six tons of coal. 

The demonstration was clear that the Diesel 
engine ship can be operated at fifty per cent of 
the cost of the coal burner. The war has inter- 
rupted the conversion of the world's ocean ton- 
nage from coal to oil, but the future of oil on 
land and sea has been proved and can be seen 
from the pressure gauge on Cerro Azul; and 
from the same point can be seen the redemption 
and regeneration of Mexico, the moment a 
brotherly hand can be extended to her. 

England and Germany both see it, for in 
these countries business and government work 
together for national development and the up- 
lift of the people. In time Mexico and the 



42 THE MEXICAN PROBLEM 



United States also should see it, and demand 
that government and business cooperate and 
that Mexico and the United States be mutually 
helpful. 

We have no right to strike down the govern- 
ments of Mexico one after another and refuse 
to the government and people financial, busi- 
ness, and political assistance. 

The only assistance the people of Mexico 
have had from the United States has been busi- 
ness assistance in railroad, mining, and oil de- 
velopment. 

THE GERMAN POSITION 

Is it any wonder that Mexico reaches out for 
national assistance, first to Japan and lastly to 
Germany? Since returning, I have had con- 
firmation from European sources of the report 
that two large deposits of German money have 
been made for the account of Carranza. This 
does not mean war upon the United States by 
the people of Mexico. 

It is difficult to predict regarding Germany. 
I saw the German war machine after Sedan and 
Gravelotte. I visited the country a few years 
ago and printed that Germany was preparing 
for a European war and to strike both Russia 



THE GERMAN POSITION 43 



and France. Few Americans would believe it. 
I returned to Germany again in 1913, noted the 
military and financial measures, the decrees for- 
bidding any new enterprises, and then declared 
that Germany could not afford a world war. 
Germany got her war, but says England is to 
blame, because if England had declared her in- 
tention to come in, Germany would never have 
thrown down the gage of battle. 

Although plans have miscarried, it should 
not be forgotten that Germany is one vast busi- 
ness organization, intertwined with tariff, gov- 
ernment and military power. The Germans 
were experting the Cerro Azul oil field and con- 
templated millions of investment therein before 
the war. It is good business for Germany to 
give Carranza financial assistance with a view 
to a standing after the war. It would be poor 
business for either Germany or Mexico to lay 
the gage of battle on the Rio Grande, for 
thereby the business aims of both would be 
defeated. 

Germany looks ahead and wants business 
after the war. Mexico needs financial assistance 
and will need business development for many 
years to come. 



44 THE MEXICAN PROBLEM 



OUR government's wobbles 

The United States has had no steady business 
or political policy toward Mexico. It has been 
"Go in!" "Come out!" "Go back!" "Stay 
out!" The Washington declaration has been, 
"Down with the tariff and into the export field," 
and when hands have been uplifted from 
Mexico, our nearest and most needy field for 
export, Mr. Bryan has responded, "Why don't 
you stay at home.^^" 

I heard it declared in Mexico, "Every Wilson 
policy toward Mexico has been wrong. Never 
has the right thing been done at the right time; 
but in extenuation of Mr. Wilson it must be ad- 
mitted that nobody can now say what would 
have been the correct policy toward Mexico." 

The strong policy was when Evarts wrote to 
our Minister Foster in Mexico in August, 
1878: — 

The first duty of a government is to protect life 
and property. This is a paramount obligation. 
For this governments are instituted, and govern- 
ments neglecting or failing to perform it become 
worse than useless. This duty the government of 
the United States has determined to perform to 
the extent of its power toward its citizens on the 
border. It is not solicitous, it never has been, 



THE WILSON REVERSE 45 



about the methods or ways in which that protec- 
tion shall be accomplished, whether by formal 
treaty stipulation, or by informal convention; 
whether by the action of judicial tribunals or 
that of military forces. Protection in fact to 
American hves and property is the sole point 
upon which the United States are tenacious. 

This practical order from the United States 
enabled Diaz to keep the peace in Mexico for 
thirty years. He was able to tell his generals, 
"You will maintain order and protect life and 
property or somebody else will." 

THE WILSON REVERSE 

Then both Taft and Wilson, by words and 
acts, reversed the Evarts policy. "As long as 
I am President, nobody shall interfere with 
them," said Wilson at Indianapolis. 

The national government in Mexico became 
powerless. Wilson's words were posted over 
Mexico. It was "open season" for all who could 
get the guns. 

Mr. Wilson announced that it would take 
more than four hundred thousand men from 
outside to restore order. 

I have reason to believe that the military re- 
port to Mr. Wilson was, "Four hundred thou- 
sand men cannot do it if directed from Wash- 



46 THE MEXICAN PROBLEM 



ington. But forty thousand men would be too 
many if directed by the al-my officers alone." 

Having blundered in and out of Mexico, it is 
now clearly the duty of the United States to 
reflect upon the situation and determine upon 
what basis it can extend a cooperative and effec- 
tive helping hand to that unhappy country. 
If we do not do it, somebody else will. 

There is no possible, re*ading of the Monroe 
Doctrine that forbids Germany or England 
making the business development of Mexico or 
rendering financial assistance to the Mexican 
government and people. But when Mexico has 
to turn from her natural guardian and protec- 
tor to European powers, the United States will 
be deservedly "counted out," both north and 
south of the Panama Canal. 

•THE MAN WITH THE HOE 

No country in the world' needs,, closer rela- 
tions with the oil development of Mexico than 
the United States. The future demands not 
only redemption of, the Mexican man of the 
soil, but the redemption 6i the American farmer 
as well. 

Agriculture is basal in tHa. world's progress. 
All industries, in both peace and war, rest upon 



THE REDEMPTION OF AGRICULTURE 47 

it. But "the man with the hoe" still indicts 
Christian civilization. 

He has no eight-hour day; he competes with 
women and children who put no price on their 
labor; his surplus products are dumped, almost 
as refuse, his milk to the milk contractor, his 
potatoes to the starch factory. He has no stor- 
age for apples when, in an abundant season, 
they are not worth the price of the barrel. 
Heaven's sun itself appears to compete with 
him. He has never been taught that there is 
only one wealth for the farmer, and that is large 
storage backed by broad acres, quickly culti- 
vated by machinery. His great machine, the 
horse, for spring and fall ploughing, "eats his 
head off" in an idle winter. 

THE REDEMPTION OF AGRICULTURE 

His redemption cannot come through the par- 
cel post or oil-smoothed roads for city motors, 
or by state and national agricultural bureaus. 

The redemption of "the man with the hoe" 
will come through the gasolene motor that will 
plough spring and fall, cultivate all summer, chop 
wood in the winter, and not "eat its head off." 

The ambition of Henry Ford is a gasolene 
tractor within reach of the farmer. Success here 



48 THE MEXICAN PROBLEM 



would mean more for the world than all gaso- 
lene motor development to date. 

It would solve the labor problem on the farm; 
enable the individual farmer to hold broad acres, 
by quick cultivation and crops quickly stored. 
The result from such prosperity for the farmer 
would be great stores of food, steadying prices 
for the world. 

The farm power, the food power, the sea 
power, the world power, cry out for gasolene 
and fuel oil. The Pennsylvania and Indiana oil 
fields are failing. California is exhausting pocket 
after pocket. The great oil area of the world 
to-day stretches from Kansas to Tehuantepee. 
The lightest oil is at both these extreme points. 
The appearance is that the great central reser- 
voirs are in the Mexican field. 

Their conservation is a world-wide necessity. 
Their protection is the duty of all nations. 

NO OIL SANDS IN MEXICO 

Very few people in the world know the geolog- 
ical structure of these oil fields. No one in the 
world to-day knows it perfectly. Nothing yet 
uncovered in the United States resembles the 
underground formation in Mexico. In California 
you pump from well-defined areas of oil sands 



STORAGE RESERVOIR AT POTRERO — 2,500,000 BARRELS 




SOME OF THE 55,000-BARREL STORAGE TANKS, MEXICAN EAGLE 
OIL COMPANY 



THE DOS BOCAS CATASTROPHE 49 



two to three thousand feet deep. The porosity 
of oil sand is fourteen per cent, and those wells 
do not average two hundred barrels a day. 

Yet there are no oil sands in Mexico. About 
two thousand feet below the level of the sea the 
oil drills strike the bed of ancient oceans and 
from coral reefs with sixty per cent of porosity 
spurt the greatest oil wells in the world. No 
pipe line yet constructed has been able to re- 
ceive the full measure of one of these gushers. 

South of Cerro Azul is the great Potrero oil 
well of the Mexican Eagle or English company. 
It gives the entire forty thousand barrels per 
day that this company can export on present 
shipping facilities, but this is not half its ca- 
pacity. Lord Cowdray is giving his whole time 
to his country at the head of the British avia- 
tion department, so essential on land and sea 
in winning the war, and his pipe lines and re- 
fineries work automatically on this coast. When 
the war is over this field may compete for his 
great organization and engineering talent. 

THE DOS BOGAS CATASTROPHE 

Above to the north, near the terminus of the 
Mexican Petroleum Company's railroad at San 
Geronimo, on the borders of the Tamiahua 



50 THE MEXICAN PROBLEM 



Lagoon, still rises a cloud of steam from the 
ruins of the famous oil well Dos Bocas. 

Here, in 1909, came in unexpectedly the 
world's greatest gusher. Through an eight-inch 
pipe line shot a column into the air fifteen hun- 
dred feet high by actual theodolite measure- 
ment; then the earth heaved and belched three 
hundred million barrels of liquid per day. How 
much of it was oil nobody could say. The tor- 
rential flood reached the boiler fires and soon 
in place of that eight-inch pipe was a heaving, 
seething mass, one hundred acres irt extent. 
Soldiers as well as civilians fought the flow and 
flames to restrict the area of damage, but for 
many nights Do^ Bocas lit up sea and shore 
for one hundred and fifty miles around. 

THE HUMAN CATASTROPHE 

Was this an advanced flash picture of the 
Mexico to follow.^ At Dos Bocas they worked 
even to save the fish of the river and the lagoon; 
but Mexico, abandoned by its friends and with 
notice to everybody else to keep out, was to 
become a politically heaving mass, with Mexi- 
cans, Americans, and Chinese massacred in the 
Mexican war flames. 

China got promises. Americans, Germans, 



THE HUMAN CATASTROPHE 51 



and English filed claims and the strongest na- 
tions of the world filed theirs at Washington; 
but where will the millions of the good people 
of Mexico who want work, wages, and human 
progress lodge their claims or cries? 

I shall never forget the sincere, earnest em- 
phasis of Edward L. Doheny, controlling owner 
in the Mexican Petroleum Company, as on 
March 16, 1917, he declared, on his yacht Casi- 
ana heading into the "northers" on the Gulf of 
Mexico: "I would sink all my interest on this 
coast ten thousand feet deep in the sea to give 
the good people of Mexico right, justice, and 
freedom in a modern system of civilization." 



CHAPTER V 

WHY NO AID FOR MEXICO? 

It is difficult to interest the people of the United 
States in the sufferings of the people of Mexico 
when our sympathies and pocketbooks are en- 
gaged in behalf of five million men in the hospi- 
tals of Europe, six million in prison camps, and 
seven million war cripples, a total of eighteen 
million daily sufferers, all making the strongest 
appeals through war-relief movements organ- 
ized in the United States. 

This is an appalling number of sick, maimed, 
and in prison, aggregating more than the total 
population of Mexico. There are forty million 
more headed in the same direction and behind 
there must be two hundred million in suffering 
families. 

This is the only explanation I can give for the 
dulled and deaf ears upon which fall the appeals 
in the name of humanity to give sympathetic 
aid to the people of Mexico now adrift in politi- 
cal, financial, and social seas with no chart or 
compass and no directing voice except that of 



THE NEW CONSTITUTION 53 



President Wilson, who declares, "They must 
fight it out among themselves." 

GEKMAN TROUBLES 

Nobody in this country desires any military 
intervention in Mexico, and the only thing that 
can at the present time invite it would be the 
German activities. All governments and forms 
of government in Mexico must understand the 
danger in this. German dynamite would do 
more damage to rulers and would-be rulers in 
Mexico than it would to the military forces of 
the United States. 

It is said that the new Carranza constitution, 
with its confiscatory measures, in effect May 1, 
1917, is primarily an attack upon Spanish, Brit- 
ish, French, and Belgian interests in Mexico and 
only incidentally an attack upon the interests 
of citizens of the United States in that country. 

Wliile the new constitution decrees that there 
shall be no retroactive measures it declares that 
all wealth beneath the surface, mineral and oil, 
is the property of the State. 

THE NEW CONSTITUTION 

There are also provisions in the new consti- 
tution dealing with the amounts of land any 



54 THE MEXICAN PROBLEM 



one individual or corporation may own. No 
foreign corporation may acquire land or prop- 
erty or water rights within fifty kilometres of 
the seacoast or within one hundred kilometres 
of the border. Any outside corporation desir- 
ing to acquire property in Mexico must under 
the new constitution renounce all foreign citi- 
zenship in relation to that property and agree 
to be subject to the constitution and laws of 
Mexico without right of appeal. 

It will thus be seen that under the new con- 
stitution the way is open for the reigning powers 
in Mexico to deal with foreign interests pretty 
much as they please. There are unlimited 
powers of taxation, regulation, and of decrees 
concerning ownership, and the penalty for non- 
compliance is confiscation. 

The result to British, French, Belgian, United 
States, and all other foreign interests must be 
steadily exerted "pressure," and it may be as- 
sumed that this "pressure" will be exerted far 
enough to produce revenues and regulations 
looking toward nationalization of present for- 
eign-owned properties. 



WAR ALLIANCES 



55 



WAE ALLIANCES MAY HELP IN MEXICO 

But self-interests or the law of self-preserva- 
tion will cause a halt when the "pressure" faces 
danger in the powers of resistance. 

The safety for foreign interests in the present 
situation is the entry of the United States into 
the war as an ally of Great Britain. All the 
allies are, therefore, now joined in the protection 
of the British naval oil base in Mexico. 

General Joffre and that calmly poised, well- 
balanced brain of statesmanship in Balfour, 
with their military and economic associates, on 
the soil of the United States, mean very much 
for Mexico. Joffre, the heart of France touch- 
ing the heart of America, and Balfour, the far- 
sighted, economic statesman, link the civiliza- 
tions of two continents in a way that means not 
only peace for Europe, but peace for Mexico. 

Balfour declared two years ago, when I was 
in England: "The world needs industrial Ger- 
many; that must not be crushed, but Prussian 
militarism must be blotted out that the true 
Germany may live." This will soon be the sen- 
timent of the entire globe, and Mexico will not 
be neglected in the enfolding arms of a future 
universal peace. 



56 THE MEXICAN PROBLEM 



MEXICAN PRESSURE 

How Mexico "is pressing foreign interests" 
is illustrated in a decree from Mexico City more 
than doubling all the taxes on oil. The big Eng- 
lish company and the Oil Fields of Mexico Com- 
pany, incorporated in New Jersey, but selling 
its oil to Lord Cowdray's concern, have each in 
their concessions the promise of immunity from 
export tax for fifty years. They and all other 
companies are now paying about five cents per 
barrel American gold as an export tax, and by na- 
tional decree must from May 1, 1917, pay about 
eleven cents per barrel export tax, or nearly 
twenty per cent of the gross value of the crude 
oil as exported. The average price of exported 
oil at the coast I figure is about sixty cents per 
barrel. Many contracts are higher and many 
are lower. Many interior oil wells would be 
glad to sell at ten cents per barrel to anybody 
who would build a pipe line to them. 

The decree also places an export tax of one 
cent a gallon on crude gasolene and of one half- 
cent a gallon on refined gasolene. Some of the 
late contracts for export, notably those of the 
Mexican Petroleum Company, have a proviso 
that the buyers under contract must pay any 
increased taxes. 



THE PEACE OF CARRANZA 57 



The British interests have paid their taxes 
under protest and will probably continue so to 
do. This is another claim mounting up at 
Mexico City and Washington, for it will be filed 
at both places. 

THE PEACE OF CARRANZA 

The claim is constantly made from Mexico 
City that Carranza has quieted Mexico except 
in mountain regions or distant places and should 
have financial support from the United States. 
Without desiring to make trouble, let me nar- 
rate some instances that refute this claim. 

Riding on a flat car toward Cerro Azul in 
March, 1917, and within two hundred miles of the 
City of Mexico, the telegraph poles were noted 
upon which, a few days preceding, the anti- 
Carranzistas had hanged six Indians in reprisal 
for the raid of their tribe upon a village near by. 
The claim was that the Carranzista people had 
given this Indian tribe arms and enabled them 
to raid, pillage, and burn the village of Amatlan, 
the ruins of which were visible on the mountain 
side as we passed on the railroad a few miles 
away. 

This apparently had been the largest native 
city or village between Tampico and Tuxpan. 



58 THE MEXICAN PROBLEM 



I have never been able to find any account in 
the papers of its destruction, but the report at 
the railroad station was that Amatlan con- 
tained three hundred and fifty Mexican famil- 
ies, nearly of all whom perished. Those who 
were not shot were burned in the firing of the 
village. 

Yet on this trip I met only two soldiers and 
two rifles; one an anti-Carranzista guard at a 
railroad station, and the other a picturesque 
anti-Carranzista general who rode with our 
party through the hills after we left the railroad 
train. It was said that he had associated with 
him thousands of anti-Carranzistas. 

When the government troops appear, the 
rebels are just plain Mexican people with no 
arms and no organization. When the army 
divides into small bodies, the plain Mexican 
people are suddenly in the bush with plenty of 
cartridges and the government soldiers are am- 
bushed or perhaps given opportunity to change 
sides. 

Similarly, when the soldiers surround the 
opposition, the anti-Carranzistas are either re- 
cruited or shot. It is astonishing how many 
Mexican prisoners, when the question is asked, 
"Carranzista or anti-Carranzista.'^" will respond 



THE PEACE OF CARRANZA 59 



"anti-Carranzista" and receive their dose of 
cold lead without a murmur. Those who respond 
"Carranzista" are handed a musket. 

In the latter part of April, 1917, 1 received word 
that a personal friend of mine, the manager of 
one of the oil companies in Mexico, had that 
month had a terrible experience. He started 
from the coast for the City of Mexico, going 
first north to Monterey, as the southern rail- 
road route was interrupted by disorder. On the 
main line, and nearer Mexico City than the 
northern boundary, the escorted train was as- 
saulted by one hundred brigands, and thirty of 
the passengers and their defenders were killed. 
There can be no denial of my report. But I 
have again had the news records of this country 
searched only to find that no one has now any 
interest to gather or print such news. 

Carranza is still appealing for financial help 
north, south, east, and west when he should ask 
the military cooperation of the United States. 



CHAPTER VI 



THE FINANCIAL BENEFITS OF DISORDER 

Washington notes, words, sentiments, and ac- 
tions have produced quicker results in Mexico 
than in any other country in the world. 

From various parts of Mexico, between the 
border and Mexico City, comes word that since 
Congress voted billions of money for war ex- 
penditure and began plans for an enormous 
army, all the "generals*' in Mexico have sud- 
denly become very polite to foreigners, espe- 
cially Americans. All the threatenings from 
German sources in Mexico likewise suddenly be- 
come non-explosive. 

There is one thing that talks in international 
relationships and that is the loading up of the 
guns. It does not make any difference in which 
direction the guns are aimed. Uncle Sam has 
not a thought about Mexico at the present time; 
his guns are all aimed for Germany. But for the 
first time all the Mexican generals and would-be 
generals know that Uncle Sam has got a gun, 
has started to load it, and is putting so many 
millions of men behind it that nobody can now 



NATURE'S RESERVES 61 



say with safety how much of a squint he may 
take around the horizon when he gets really 
fighting mad in the interest of universal peace. 

Meanwhile, it may be well to point out for 
financial interests the benefit to oil producers 
in that country of the American policy to date 
of non-intervention and of general disorder. 

The great oil gushers of Mexico are near the 
coast. They are thus of world-wide value, but 
there is no storage capacity in the world that 
might not be quickly exhausted by a full run 
from one of these gushers. The Mexican Petro- 
leum Company has storage for nine million bar- 
rels, and it is full. The Cowdray interests like- 
wise are full up to their six million storage 
capacity. 

nature's reserves 

Nature is wonderful in concealing her natural 
resources until the world is prepared for them. 
Then it is discovered that she has all the while 
been hanging out invitation signs for man to dig 
and produce. 

To-day, however, the world can see and scien- 
tifically figure the possibilities of both coal and 
oil exhaustion for all known sources of supply 
on this planet. 



62 THE MEXICAN PROBLEM 



When petroleum was first discovered in Penn- 
sylvania the rivers carried it to waste. Rocke- 
feller laid the foundation for the biggest fortune 
in the world by borrowing money to store oil 
when oil had no value but was running to 
waste. 

But Rockefeller, seeking a new stomach to 
bear up the burden of his hundreds of millions, 
must trust to "experts" and to "expert" reports 
on Texas and Mexican oils. The result was that 
Texas oils were officially condemned by the 
Standard Oil people upon expert testimony and 
the oil gushing from Spindle Top sold be- 
low three cents a barrel, with few people having 
the Rockefeller courage to buy storage capacity 
for it. 

The popular superstition is that the Standard 
Oil interest has sought to grab the oil wealth of 
Mexico. If any one, however, had outside keys 
to 26 Broadway, he could find therein three 
successive "expert" reports condemning the 
early samples of Mexican oil as fakes. 

The Standard Oil chemists reported that the 
oil sent from Mexico could not be nature's com- 
pound; somebody was attempting to impose 
upon them by injecting gasolene and sulphur 
into worthless bitumen or asphalt, but they 



THE SHUT-IN OIL WELLS 63 



had not been chemically combined and the fraud 
was easily detectable. 

Mexican asphaltum had no value and Mexican 
oils as first discovered and analyzed were largely 
Mexican pitch or asphalt and were officially 
declared good for neither kerosene nor gasolene. 
It was with difficulty that the railways of Mexico 
could be induced to change their engines from 
high-priced coal to cheap Mexican fuel oil. 

THE SHUT-IN OIL WELLS 

When farther south the gasolene values of 
Mexican oils were proven, the compound was 
shown to be just another new one of Mother 
Earth with the gasolene and sulphur more de- 
tached. When the day of the oil gusher arrived, 
one can only conjecture the result to the world 
had there been tranquillity in Mexico and capital 
and shipping easily available. It might have 
been the story over again of "ten thousand tons 
of gold" to be dumped into the ocean to save 
the investment base of the world. 

To-day there is a proven daily capacity of 
one million barrels of oil between Tampico and 
Mexico City and there are neither pipe lines nor 
ships to take away one-sixth of it. A year's drill- 
ing would multiply the present drilled capacity. 



64 THE MEXICAN PROBLEM 



and with the high porosity in the "reefs" every 
oil land owner would have to quickly drill his 
boundaries for self-protection. 

A few gushers might be in position to sell their 
oil to a pipe line at three cents a barrel and make 
a million a year. It would be a wicked world- 
waste. The Tampico oil fields could equal the 
total production of the United States on about 
forty-eight hours' notice of facilities for stor- 
ing the product. 

But Mexico, politically unsettled, with only 
two pipe lines in operation, has her oil wealth 
conserved, and Lord Cowdray can report to the 
English shareholders of the Mexican Eagle Com- 
pany that earnings are ten million dollars per 
annum Mexican gold, or five million dollars per 
annum United States gold; and the Mexican 
Petroleum Company can report to its American 
shareholders net earnings of about the same 
amount — six millions for the $39,000,000 com- 
mon stock the past year. 

THE SHUT-IN EARS 

Always hoping for the best, I can see possible 
benefits arising from the "shut-in" policy for 
Mexico — the shutting-in of its oil wells and the 
shutting-in of the ears of President Wilson to 



THE SHUT-IN EARS 65 



all appeals for help. The oil forces of nature 
have been conserved not only in the interest of 
world development but of Mexico's slower and 
more substantial progress. 

President Wilson has so turned his back upon 
the Mexican situation that his most intimate 
political advisers will not mention the subject of 
Mexico in his presence. His mind appears to 
them absolutely closed on the subject. There is 
no "watchful waiting" policy about it. That 
was Mr. Bryan's phrase and policy. 

When one looks at the flaming war fires in 
Europe, he may see a reason or a Providence in 
the Wilson attitude toward Mexico. 

Mr. Wilson may have been better informed 
concerning the seriousness of the European sit- 
uation than the public has been led to believe. 
The people who have had his confidence on this 
subject have not had his confidence as respects 
Mexico, and it may be well doubted if any- 
body knows exactly Mr. Wilson's real position 
toward our suffering neighbor to the South. 

There is just one American financial interest 
with millions in Mexico that is in thorough 
agreement with the Wilson policy, which is that 
of news suppression and the quieting of all agita- 
tion concerning Mexican affairs. But I do not 



66 THE MEXICAN PROBLEM 

think it judicious at the present time to further 
enter that phase of the subject. 

The United States can have no well-defined 
policy toward Mexico the public announcement 
of which would be helpful at the present time. It 
should be sufficient for one to reflect that the 
United States has girded on its armor in an 
Anglo-French alliance, the end of which cannot 
be in sight while either two of these three great 
nations remain alive. 



CHAPTER VII 



THE LAW OF COMPENSATION 

The problem of value with any investment is 
determined according to the aim of the manage- 
ment, otherwise the soul of the proprietor, 
owner, or manager. 

An elephant and a jackass were born on the 
same day in the same stable, drank from the 
same spring of water, and ate from the same 
bale of hay. At the end of several years every 
physical fiber of each had come from the same 
water and the same hay, but the elephant was 
still more of an elephant and tlie jackass more 
of a jackass — because one was born with the 
soul of an elephant and the other with the soul 
of a jackass. 

One of my newspaper associates was recently 
en route from Winnipeg to meet me in Montreal. 

"What did you learn.?" 

He replied: "I visited all the smoking-cars 
en route to mingle with the people. They were 
jovial and light-hearted in the third-class smoker, 
but in the first-class smoker sullen, morose, 



V 



68 THE MEXICAN PROBLEM 



thoughtful. I beheve that of all my friends in 
Winnipeg the war has slain four out of five. 

"In the first-class smoking compartment a 
Canadian asked: *What is the compensation to 
Canada for all her sacrifice.^' 

"And a British ofiicer growled, * There is in 
this world no compensation in sacrifice.'" 

"Did you refute him 

"How could I, with eighty per cent of my 
friends in Winnipeg dead in the war and my own 
memories of a struggle when as a youth of ten 
to protect my school-books, snatched from my 
hand by a little negro girl, I rolled in blood and 
dirt, for she buried her teeth in my flesh to the 
cheek-bone, and I carry the scar to-day.^ ^^Tiat 
compensation to me or to Canada.^" 

I had to respond: "I have never forgotten the 
slow, solemn words of Ralph Waldo Emerson in 
the Old South Meeting-House at Boston, as he 
drawled forth: *The Sandwich Islanders have 
a proverb that the strength of the slain enters 
into the arm of the conqueror.' 

"Was your arm weakened or your fighting 
soul for right shrunken by your youthful com- 
bat .^^ Did I not tell you two years ago that the 
war had rejuvenated France and raised in her a 
new soul? Is she not to-day the proud treasure 



CARTRroGES ARE CURRENCY 69 



of the world? There are many rich men in the 
United States who would like to swap their 
money and position with the men of England 
who have given up their fortunes in defense of 
their country but have found their souls. 

"The sum of human happiness to-day is 
greater in the British empire united and at war 
for liberty and humanity than ever before; and 
it will increase with the sacrifice." 

Then I went down into Mexico and studied 
an empire of natural wealth and resources, but 
a nation that has never yet found its soul, or a 
flag which represents service to humanity. 

CARTRIDGES ARE CURRENCY 

^VAHien the Mexican soldier finds Carranza 
money will not buy food, he or his woman takes 
the government cartridges and buys their provi- 
sions. Cartridges are currency in Mexico. 

Zapata has maintained himself supreme in his 
state against six administrations in the City of 
Mexico and never imported arms or munitions. 
He holds a rich territory, the food of which can 
buy the arms and cartridges of his opponents. 

Seventeen million people on the richest min- 
eral territory of the world, that can grow any- 
thing in the world and produce food in abun- 



70 THE MEXICAN PROBLEM 



dance every month of the year, use their cart- 
ridges for currency; and their national soul can 
never be born under that miserable motto of self- 
interest, "Mexico for the Mexicans," which 
means Zapata for Zapata, Carranza for Car- 
ranza, Pelaez for Pelaez, Villa for Villa, until 
every part is for itself and nobody for the whole. 

Returning north, I find Canada, seven mil- 
lion of people, on a soil that works only three or 
four months of the year, sacrificing state and 
national treasure to develop national transporta- 
tion, and until this war dependent upon foreign 
credit, now summoning all her resources, not for 
Canada, which needs no defense, but for civili- 
zation and the empire of which she is a part; 
giving more than four hundred thousand of her 
best men to the battle line and over a billion of 
her treasure and earnings for the funds of war; 
and men, women, and children working every 
possible hour of the twenty -four. 

Mexico is still seeking compensation for some- 
thing she never knew she had until American 
enterprise developed it and with it lifted her 
labor toward modem civilization. 

Canada, like France and Britain, has found 
her soul, not in the motto, "Canada for the 
Canadians," but in Canada for world defense. 



OUR CRIME AGAINST MEXICO 71 



Canada is young but has the soul of an ele- 
phant. 

Mexico will never be for the Mexicans or for 
humanity until American and European enter- 
prise has had fair play in that country and been 
permitted to pay fair wages to her willing people 
who are longing for light, enlightenment, and 
education. Without education leading to useful- 
ness there can be no patriotism. 

OUR CRIME AGAINST MEXICO 

Carranza is in a difficult situation. We of the 
United States have struck down all credit for 
Mexico. 

Had we deliberately gone about a diabolical 
scheme to wreck a billion of foreign capital in 
Mexico, to give forty thousand foreigners over 
to plunder, and to decree misery, poverty, and 
sorrow for more than fifteen million Mexi- 
cans, we could have conceived of no more effec- 
tive plan than that which we have executed 
toward her without ever planning anything 
against her. 

Because the Guggenheim smelting interests 
could make some millions of dollars more a year 
with peace in Mexico, nobody must speak a 
word for peace in Mexico, for the Guggenheims 



72 THE MEXICAN PROBLEM 



represent capital and the securities of their com- 
panies are in Wall Street. Because the Standard 
Oil people with peace in Mexico might build pipe 
lines therein and buy Mexican oil and make 
money refining it, it is better to have anarchy in 
Mexico than that the Standard Oil Company 
should have any more capital, wealth, or earn- 
ings. 

Therefore, Mexico must be cut asunder, Car- 
ranza must rule or tumble down in Mexico City; 
Villa may overrun Chihuahua and even raid 
into the United States; Pelaez may govern in 
the oil fields, Felix Diaz may operate from Vera 
Cruz, Zapata may rule to the south of Mexico 
City, and Cantu may run Lower California. 

If we had meditated a diabolical plan to ruin 
Mexico, and all the friends of Mexico, how suc- 
cessful would have been the most wicked machi- 
nation if it could have accomplished the present 
disunited and hopeless situation! 

If Mexico had been permitted to be truly free 
by an assisting hand from the United States, 
what a power to-day would be her food and min- 
eral resources in health and help for the whole 
world ! 

We have declared ourselves brother-keeper of 
Mexico and have imprisoned her; and as she 



THE COMPENSATION OF LOOT 73 



tears herself within her own prison walls, we stuff 
cotton in our ears and give her over to the I. W. W 
and the crazy, illogical brains of such as Lincoln 
Steffens. 

With many of the richer states in Mexico cut 
off from support to the central de facto govern- 
ment, where shall Carranza raise revenue to pay 
his soldiers and maintain law and order? 

THE COMPENSATION OF LOOT 

It is a mystery to everybody in and out of 
Mexico how Carranza can exist. I have very re- 
liable reports from abroad that some German 
money has come into his hands. Only recently 
he took $38,000,000 Mexican silver from the 
banks in Mexico City, and it was figured that 
this would last him only so many weeks and 
that then Villa would again be raiding over the 
country. When Carranza has troops and money, 
Villa takes to the hills, but when the money is 
gone and his soldiers clamor for pay. Villa ap- 
pears on the scene and promises the compensa- 
tion of loot; and our Mr. Wilson says that these 
good patriots, both of whom have been his allies, 
must fight it out as did our forefathers. 

I wonder if Mr. Wilson's forefathers would 
really have sat up on the top rail of a fence and 



74 THE MEXICAN PROBLEM 



cheered on the Indian tribes against the Ameri- 
can pioneer bringing the white man's civilization 
into the jungle? Would they have called out, 
"Bully for you, old Puritan, over goes your 
meeting-house and some children in the flames ! 
Buck up there, old Sioux, there are more scalps 
for you! more women to torture! more fields to 
burn! more plunder ahead! fight it out!" 

Now, individual reader, please don't blame 
Mr. Wilson; he represents you, calloused and 
hard to the sufferings of your neighbor, rejoicing 
in the sacrifice of your fathers and the prosperity 
of your present position. You have not and you 
do not take any more interest in Mexico than 
you do in a famine in India. You think Mexico 
is a good joke on the Guggenheims, the Standard 
Oil Company, and Wall Street, but when a long 
war in Europe, where you are now to take the 
forefront of the battle, has softened your heart 
and the income taxes have come down to the 
smallest savings, you will be less of an Indian, 
less of a savage, less of a Mexican, yourself. You 
will be more thoughtful, more tender of heart, 
and a more worthy son of the men who first 
brought freedom and true democratic govern- 
ment into the American jungle. 

The pity about it all is that Mexico was 



THE DIAZ RECORD 75 



brought so near to modern civilization under 
Diaz; then an explosion and a political and 
social catastrophe, the like of which no man in 
or out of Mexico had ever dreamed ! Yet I don't 
believe there were ever two hundred thousand 
men under arms in Mexico. As to any invasion 
by the Gringos, there were never fifty thousand 
Americans in the whole of Mexico, and to-day 
there are only about five thousand. 

THE DIAZ RECORD 

I first met Porfirio Diaz nearly forty years ago 
when he was inviting New England capital into 
the railroad development of Mexico. He ruled 
Mexico with an iron hand and invited the capital 
of the world into its development. His policy 
never varied. It was to promote in Mexico every 
enterprise that would give his people opportu- 
nity for work, wages, and education. I have 
talked with all interests that ever had to deal 
with him and I have never heard a charge that 
he had the taint of graft or personal ambition. 
Every business interest that ever appealed to 
him for support found him fair and forceful for 
the right. 

I was pleased to learn on this trip to Mexico 
that when he died, an exile in France, he was not 



76 THE MEXICAN PROBLEM 



the absentee ruler with treasured or hidden mil- 
lions at his command. He left seventy million 
dollars in the Mexican government treasury, but 
died a pauper, as befits an exiled patriot; and 
his funeral expenses were paid by sympathetic 
American friends who still hope that the native 
blood of Mexico will produce more of his kind. 



CHAPTER VIII 

THE "eFFECTIVOs" IN MEXICO 

Neither oil, mineral wealth, nor concentrated 
land ownership has been responsible for the 
break-up in Mexico. Outside capital and out- 
side engineers built first-class steel railroads 
throughout Mexico, opening up her natural re- 
sources to the world. Talent enough in Mexico 
has been developed to operate them with fair 
efficiency when the rifle bullets are not ringing 
over the rails. 

All attempts to give land on shares or in fee 
simple to natives who would cultivate it have 
been failures. The mineral resources have de- 
veloped a fine middle-type Mexican labor, com- 
petent to run stationary engines and do second- 
grade engineering work. But the Mexicans will 
not work well under their own countrymen. 
Whether it is native jealousy or desire to learn 
from the Anglo-Saxon race, or whether it is that 
innate recognition, universal over the world, of 
superior leadership, one cannot as yet clearly 
declare. 



78 THE MEXICAN PROBLEM 



THE MEN WITH THE " SWING " AND THE "bING" 

I was surprised at the high type of Americans 
directing affairs in the oil fields. They are the 
big fellows of the physical and mental stamp of 
our pioneer western railroad builders. They love 
the life, the climate, the excitement and the op- 
portunity to do things in an expansive way. 
They must be quick, resourceful, and diplo- 
matic, and they are. The natives admiringly 
call them the "effectivos" — the people who do 
things. 

One could readily see that Edward L. Doheny 
was the driving force of the Mexican Petro- 
leum Company, and he is this whether on the 
Atlantic or the Pacific, in California or New 
York; whether planning expansion at Tam- 
pico or expressing himself forcefully in Mexico 
City. 

Later I shall write of this remarkable Amer- 
ican pioneer, but at present I wish only to 
say that he and John D. Rockefeller share in 
common the one transcendent quality that 
makes a business strong and great. It is said 
that Rockefeller in his judgment of men never 
selects a round peg for a square hole. His men 
always fit their places. In this respect his judg- 



THE "SWING" AND THE "BING" 79 

ment is almost uncanny. Doheny shows the 
same remarkable quality in his selection of men. 
Is there a new engineer just located somewhere 
on the work: Doheny must run across him, ask a 
couple of questions, learn the correct spelling of 
his name, and it is all over in two minutes. He 
will tell General Manager Wylie a little later the 
seven qualifications of that engineer and his two 
deficiencies which are to be watched. 

And Wylie is the man with the "go" and the 
swing" and the "bing." He inspires and fires 
the whole line. His eye will detect a misplaced 
culvert on a railroad, a small leakage, or a large 
wastage. He knows his cost sheets in detail; but 
Doheny knows the round result in every quarter. 
No long letters and no correspondence are 
wanted by these head men. Results only are 
asked for, and the correspondence is telegraphic 
at a cost of somewhere between ten thousand 
and twenty thousand dollars a year. 

Americans are not born for position; they 
make them. The ambitious young man should 
seek his opportunity near the left-hand of power. 
The right-hand man of Wylie is Paddleford, but 
he began on his left as physician. He demanded 
activity and Wylie sent him down the line — 
** Flick is the boss driller, but you can help in 



I 



80 THE MEXICAN PROBLEM 



detailed reports." The result was Paddleford 
as General Superintendent, building railroads, 
pipes lines, and pumping stations. 

Captain Green, the local superintendent at 
Tampico, is rightly titled. He was formerly with 
our army in the Philippines, where he mastered 
Spanish, and, therefore, in Mexico he can talk 
two languages at once — polite Spanish to the 
court and officials, and forceful English at the 
same time to the men under him. He is two 
hundred and fifty pounds of effective dynamite 
and a jaw that means fight if necessary. 

MINTING OIL 

The expanding part of the Mexican Petroleum 
Company's property at the present time is the 
topping plant at the Tampico terminal of the 
pipe line, said to be the largest topping plant in 
the world. Smith, at the head of it, was formerly 
with the Waters-Pierce refinery. He is several 
inches over six feet and the Mexicans under him 
look like children. Of the more than fifty thou- 
sand barrels produced daily half goes through 
the topping plant, which, without impairing the 
value of the oil fuel, takes a half-dollar's worth of 
gasolene — wholesale price of distillate at Tam- 
pico — right out of the crude oil barrel and at 



MINING OR REFINING 



81 



ninety per cent profit. This plant should soon 
be topping all the oil production. It is better 
than a gold mine so long as gasolene keeps up 
in price; it is a mine with the gold minted as a 
by-product. Yet the buyer who transports it, 
further refines it and makes distribution, gets 
almost as much more out of it. Doheny believes 
in division as the proper way to attain results in 
addition. 

Nevertheless, the Mexican Petroleum Com- 
pany is completing a two-million-dollar refinery 
at New Orleans, which should soon be in opera- 
tion. 

MINING OE REFINING 

And, speaking of oil refining, my mind is still 
working over the problem of where the wealth 
from oil in the future is to be, whether from the 
mining or the refining end. 

The Standard Oil people, operating only in 
American territory and desiring to mine only 
ten or fifteen per cent of the oil they transport 
and refine, have taken in dividends, and created 
in value, more than five billion dollars from the 
transportation, refining, and marketing of oil. 
This is a sum five times our recent national debt. 
It is also the sum of the cost of prosecuting our 



8£ THE MEXICAN PROBLEM 



Civil War. It would dig a dozen Panama Canak, 
and it represents more than one-third of the 
values that legislation has permitted to remain 
in the entire transportation system of the United 
States. But where are the "Coal Oil Johnnies," 
the original diggers for oil and their early mil- 
lions .f^ 

The Standard Oil Company made its mil- 
lions where millions are always made, in material 
service to the widest number of consumers. The 
"independent" producer in the United States 
formerly had one main customer. He never had 
half a dozen people bidding for his oil. The pro- 
ducer of fuel oil to-day has the world for his cus- 
tomer so far as he can reach the world by pipe 
lines or ships. Still his customer must be a refiner 
or a fuel oil burner. But it is a wicked waste to- 
day to burn the unrefined crude oil from any oil 
field in the world. 

A forty-two gallon barrel of crude Mexican oil 
is worth only about sixty cents on the Gulf of 
Mexico- Ten per cent of it is gasolene and there 
are many Mexican oils from which a good deal 
more than ten per cent in gasolene can be taken. 
In the topping plant at Tampico it is separated 
at a cost of less than one cent a gallon for the 
gasolene, and the wastage in handling this gallon 



SHIPPING 



83 



is only one-half of one per cent. Gas from the oil 
wells heats the oil to a temperature of three 
hundred and twenty-five degrees, and in the 
condensation the gasolene is drawn off. Some 
contracts with the Mexican Petroleum Com- 
pany have run below sixty cents, but the average 
received at Tampico for a barrel of oil can be 
brought up to above ninety cents by the topping 
plant, which, when finished to top all the oil, will 
have cost far less than one million dollars. Across 
the river the Pierce Oil refinery takes in crude 
oil from the Mexican Petroleum Company and 
gets two per cent in beautiful paraffin cakes. In 
all there are thirty-five commercial products in 
petroleum, and they sub-divide into many more 
commercial uses. 

There is a great future for Mexican oil in the 
refining business. There is yet more money now 
in the transportation and refining and merchan- 
dising of Mexican oil than there is in the value 
of the oil itself at the seaboard. 

SHIPPING 

The Mexican Petroleum Company has put 
inore than twenty millions in cash into devel- 
opment within Mexico, and with its majority 
owner, the Pan-American Petroleum & Trans- 



84 THE MEXICAN PROBLEM 



port Company, will soon have a like sum m 
shipping. Building plans at present under way 
will round out a fleet of twenty-two ships with 
two hundred thousand total tonnage, costing 
about seventeen million dollars, and the whole 
could be sold to-day, lock, stock, and barrel, 
completed and uncompleted, for a good deal 
more than thirty million dollars. There are, be- 
sides, five chartered ships abroad promised for 
the close of the war, bringing the fleet up to 
twenty-seven ships. 

The Mexican Petroleum Company does not 
own its ocean-going oil carriers, but has put more 
than three million dollars into refining and 
storage plants in the United States. 

Such is the demand for ships in oil transpor- 
tation that the Union Oil Company of Cali- 
fornia is relieving the situation by filling its 
South American contracts at Tampico instead 
of Southern California, as the Panama Canal 
so shortens the shipping distance. 

DIVIDENDS 

The demands upon the Mexican Petroleum 
Company for expansion, for increased shipping 
facilities, for storage, and for refining are so tre- 
mendous that in my judgment the stockholders 



DIVIDENDS 



85 



ought to be fully informed of the rich possibilities 
before them and invited to forego all dividends 
until these can be declared as Standard Oil divi- 
dends have always been declared — from over- 
flowing treasuries. Money in oil ships, oil refin- 
ing, and oil storage facilities will in the end return 
to the patient holders from twenty-two to fifty 
per cent per annum. When competition in trans- 
portation and refining has lowered this return, 
Mexican Petroleum stockholders should take 
their dividends. Meanwhile, the profits will be 
added to the value of the shares. There is only 
one place in the world where a gold dollar is 
worth and is quotable at two gold dollars, and 
that is in the treasury of a profitably expanding 
company. 



CHAPTER IX 



OIL EXPANSION 

The submarine, the aeroplane, the modern war- 
ship, the pleasure automobile, the motor truck 
and the oncoming farm tractor are all possibili- 
ties from petroleum development. 

War is a tremendous consumer of oil and gaso- 
lene and is drawing down the stocks of oil above 
ground throughout the world. War's demand 
has doubled the retail price of gasolene this side 
of the water and multiplied it three- and four- 
fold on the other side, where it is permitted to be 
used in peaceful pursuits only to a limited extent 
and under government regulation. 

In England no oil is permitted to lay the 
dust on the highways. If you have official busi- 
ness, you are permitted a limited amount of 
gasolene at seventy -five cents per gallon. It 
should thus be measurably clear that industrial 
development from oil is held back by the war. 
The world has use, outside the war area, for all 
the oil that can be produced and transported for 
a long time after the arrival of peace. 

Nevertheless, it may be useful to note a few 



NAVAL OIL DEVELOPMENTS 87 



facts concerning naval development under oil 
supplies, because such development opens the 
way to tremendous merchant shipping develop- 
ments from oil after the war. Without fuel oil the 
United States government could never have de- 
signed for its first line battle cruisers a boiler in- 
stallation with one hundred and eighty thou- 
sand horse-power. 

NAVAL OIL DEVELOPMENTS 

The projected battle cruisers of the United 
States could not be reproduced if required to use 
coal nor can they be remodeled for burning coal. 

One of the modern monster war cruisers may 
use fourteen thousand barrels of oil in twenty- 
four hours. Although the United States Navy 
is now using but a million and a half barrels per 
annum, the estimate of the Navy Department 
is that it will be using nearly seven million bar- 
rels within six years. It was declared six months 
ago at Westminster: "If we could describe what 
the recent push has meant in the way of petrol, 
it would stagger Parliament." 

Assistant Secretary of Navy Roosevelt has 
declared: "It may be set down as a definite con- 
clusion that the navy cannot revert to coal- 
burning vessels." 



88 THE MEXICAN PROBLEM 



Fuel oil for the navy, he says, has given in- 
creased speed and cruising radius, control of 
smoke-screens, reduced fire-room forces by 
fifty-five per cent, increased the efficiency of 
refueling at sea twenty-five per cent, given abil- 
ity to sustain maximum speed for long periods 
of time without clogging the furnaces, flexi- 
bility in speed, and finally greater safety from 
submarines, as in modern American ships the 
fuel oil is disposed along the bottom to cushion 
the blow of exploding torpedoes. 

Considering this subject, the United States 
naval consulting board has reported that **the 
Mexican oil fields are probably the most ex- 
tensive deposit of oil anywhere in the western 
hemisphere, if not in the world. To-day Great 
Britain renews her oil fuel from Mexico, and is 
assured thereof only so long as she maintains 
undisputed control of the seas." 

OIL STATIONS FOR SHIPS 

Some economists and financiers figure that 
the development of the oil industry is measur- 
ably dependent upon the development of oil 
supply stations throughout the world, notably 
at the great shipping ports. 

You may contract in London for annual sup- 



EXPANSION IN MEXICO 89 



plies of coal at any shipping port in the world, 
and the price before the war was not far from 
five dollars per ton. 

Coincident with the building of Diesel engine 
ships must be the establishment of oil supply 
stations around the globe, so that steamship 
owners and shipping agents may contract for 
oil supplies as they now contract for coal. 

The Daniels idea of an oil base in California 
for the United States is an absurdity. What is 
wanted for our navy is American commercial oil 
stations. No navy can use oil in amount com- 
parable with the uses of commerce, and only 
commerce can sustain oil stations around the 
globe. 

EXPANSION IN MEXICO 

Before the European war the eyes of the world 
outside of the United States were focused upon 
the Panama Canal and the nearest oil base 
thereto for ships. 

The United States has oflScially opened its 
eyes a bit to the question of oil for its naval 
ships, and not long ago appropriated sixty thou- 
sand dollars to investigate fuel oil and gasolene 
for naval requirements and naval storage; but 
while the United States now is, and has been 



90 THE MEXICAN PROBLEM 



from the beginning, the biggest oil producer in 
the world, nobody seems to have taken the 
slightest interest in building up a mercantile 
marine for the United States on the basis of the 
cheapest and largest oil supplies on our side of 
both oceans. 

While the British government announces in 
Parliament that its mercantile shipping is within 
five or ten per cent of what it was at the begin- 
ning of the war, except so far as it is comman- 
deered for war service, and at the same time 
declares that its naval forces are so rapidly ex- 
panding that at the close of this war it will have 
a tonnage equaling the entire naval tonnage of 
the rest of the world, it is not unmindful of the 
future in its mercantile shipping, especially in 
relation to improvements and developments in 
connection with oil supplies. 

While the British navy is probably taking 
twenty thousand barrels a day from the Mexi- 
can Eagle Company, a British steamship com- 
pany is negotiating with the Mexican Petroleum 
Company for a very considerable part of its 
production in the future. 

The Mexican Petroleum Company may elect 
to deliver the oil at Tampico or elsewhere 
around the world on six months' notice. Of 



EXPANDmG SHIPMENTS 91 



course no producing company would now con- 
tract to ship around the world. When peace 
relieves the shipping situation, the development 
in oil shipping and in fuel oil ships will be tre- 
mendous. 

EXPANDING SHIPMENTS 

The Pan-American Company now has twelve 
steamers working for the Mexican Petroleum 
Company, and nine more are due this year. 
Six should be delivered this summer and ten 
thousand tons a month should be steadily added 
to the company's shipping facilities. Three 
ships aggregating thirty -two thousand tons are 
due next year. 

The Union Oil Company has seven steamers 
taking Mexican Petroleum Company oil through 
the Panama Canal to South America, and the 
Standard Oil Company of New Jersey has five 
ships taking its oil north. 

In 1916 the Mexican Petroleum Company 
produced 12,400,000 barrels of oil and sold 
10,600,000 for $8,825,000, or a little above 
eighty-three cents per barrel. The cost, includ- 
ing bond interest, taxes, and depreciation, was 
twenty-five cents per barrel. The production 
for 1917 should equal fifty thousand barrels a 



92 THE MEXICAN PROBLEM 



day, or 18,250,000 barrels and it should realize 
not far from one dollar per barrel. 

If I were writing a financial article, I should 
immediately figure that, deducting the interest 
on Mexican Petroleum eight per cent preferred 
stock, there should remain for the $40,000,000 
Mexican Petroleum common stock, and United 
States government war taxes, not far from 
thirty per cent; but as I am not writing a finan- 
cial article, but on the Mexican situation in gen- 
eral, I give the following as the best estimate I 
could get in Tampico of the probable movement 
of Mexican Petroleum Company's oil in 1917: — 

4,000,000 barrels to South America by the Union 

Oil Company. 
3,000,000 barrels into New England. 
3,000,000 barrels to the Standard Oil Company of 

New Jersey. 

2,500,000 barrels to the Magnolia Oil Company (a 

Standard Oil subsidiary in Texas). 
2,000,000 barrels to New Orleans and Florida. 
2,000,000 barrels to the Atlantic Refining Company. 
1,000,000 barrels to the Prudential Company. 
1,000,000 barrels in "tops." 

I give the above table to show the wide dis- 
tribution of this expanding company, whose 
production is, in my judgment, only in its be- 
ginnings. 



EXPANDING SmPMENTS 93 



The contracts for the "tops" or distillate call 
for barrels of fifty-gallon capacity. 

To date the Mexican Petroleum Company has 
produced about eighty million barrels of oil, of 
which more than fifty-five million barrels have 
come from the Casiano well at a pressure of 
two hundred and sixty-five pounds and with 
the valve unchanged during the seven years of 
its operation and the pressure undiminished — 
and Cerro Azul is younger and greater, but can 
be more closely shut in. 



CHAPTER X 



PIONEER WORK FINISHED 

The expansion of the Mexican Petroleum Com- 
pany in its beginnings was by land acquisition. 
Such expansion may now be considered as 
ended. Some people figure that more than 
three-quarters of the oil values in this Mexican 
field are under the Mexican Petroleum Com- 
pany's six hundred and twenty thousand acres 
and that they represent a potentiality of at 
least five billion barrels in production, a sum 
ten times the world's annual consumption. But 
no man can set limits or boundaries upon this 
oil territory. 

Doheny truthfully says, "Geology is a joke 
in Mexico; values are where you find them. . . 
And Doheny has led in finding values both in 
California and Mexico. 

His first purchases in Mexico were in August, 
1900, although prospecting was begun by Do- 
heny and Canfield in the May and June pre- 
ceding. They were American pioneer inventors 
and soon foimd a cheaper method of prospect- 



EXPAiroiNG ENGINEERING 95 

ing than in crawling and cutting their way 
through the jungle. They announced they 
would pay five pesos to anybody pointing out 
the location of "tar spots." They were inun- 
dated with "tar spots" and readily took leases 
on thousands of acres. So pressing were the 
Mexicans to realize money that royalties were 
sometimes paid several years in advance, and 
when they would no longer pay extended ad- 
vance royalties, titles were forced upon them. 

EXP.^^DING ENGINEERING 

The same forces that engineered the construc- 
tion are still engineering the company's expan- 
sion in and out of Mexico. How successful this 
engineering has been to date may be illustrated 
by the fact that Manager Wylie estimated for 
the first eight-inch pipe line a capacity of twelve 
thousand five hundred barrels a day, with 
pumping stations twenty miles apart. By put- 
ting the pumping stations fourteen miles apart, 
the pipe line capacity was advanced to twenty 
thousand barrels a day; then the pumping sta- 
tions were improved and the oil was a little thin- 
ner than expected and the eight-inch pipe line 
was soon carrying thirty-five thousand barrels a 
day. But improvements and expansion continued. 



96 THE MEXICAN PROBLEM 



Now the two pipe lines carrying oil are de- 
livering seventy-five thousand barrels a day 
at the Tampico terminal, and sixty thousand 
barrels a day are being exported, along with 
more than one hundred thousand barrels of 
gasolene per month. Orders have just been 
given to burn oil at the pumping stations and 
the topping plant, releasing the third pipe line, 
which is now used as a gas line, so that it can 
be used to transport oil. This may bring the 
company's capacity for delivery at Tampico to 
above one hundred thousand barrels per day. 

The engineering enterprise in the Mexican 
Petroleum Company resembles the history of 
our western railroad pioneers, who laid their 
rails on the prairies in advance of the settlers. 
The Mexican Petroleum people actually had 
the audacity to build railroads and pipe lines 
in advance of their wells and upon the basis 
only of the oil seepages. 

A million and a half dollars went into the 
first pipe line and two million and a half dollars 
into the railroad and pipe lines to Cerro Azul, 
all in advance of any oil well. 

When the great Casiano well came in, Sep- 
tember 11, 1910, a million and a half barrels of 
oil had to be burned to keep it from the rivers. 



EXPANDING ENGINEERmG 97 



where it might have done incalculable damage, 
but the company's engineering forces put up 
fifty-five thousand barrel tanks at the rate of 
one every four and a half days. Last year Cerro 
Azul shot a million and a half barrels into the 
air before it could be controlled. But here again 
the company's forces saved, by earth dams, 
more than half of this, and then for safety 
burned the overflow. There is no evidence as 
to the number of oil gushers that may burst 
forth in the future, but knowledge of how to 
handle them has increased. 

And speaking of the standard fifty-five-thou- 
sand-barrel steel oil tanks, the reader may be in- 
terested to know that they are thirty feet high 
and one hundred and fifteen feet in diameter, 
are usually surrounded by an earth dam to save 
the oil in case of accident, and have usually a 
bottom valve through which the oil may be 
drawn off if a bolt of lightning fires the tank. 

The Mexican Petroleum Company on its 
thousand acres of ground at "Tankville" and at 
its Tampico terminal has one hundred and three 
of these tanks, but the eye will meet them at 
almost any railroad shipping point in the United 
States. 

The first complete monthly shipments were 



98 THE MEXICAN PROBLEM 



in January, 1913, when two hundred and forty- 
seven thousand barrels left the wharf at Tam- 
pico. By October, 1916, the shipments had 
reached eight hundred and ten thousand barrels. 
Now they are above a million and a haK barrels 
a month. 

PIPE LINES, RAILROADS, MOTOR WAYS, AND 
WATERWAYS 

This American concern has nearly half the 
pipe-line mileage in the country. It has three 
eight-inch pipe lines from Tampico to the 
Casiano well, sixty -five miles distant. Thence 
two eight-inch lines to Cerro Azul, twenty-two 
miles, and an eighteen-mile line to Tres Her- 
manos, a total of two hundred and sixty-four 
miles. The oil is kept moving by seven pump- 
ing stations operated by gas from a line to the 
Casiano well, but the stations are equipped with 
oil-burning apparatus, now to be put in com- 
mission as already noted above. The oil gushes 
at such a temperature that it flows without 
reheating. 

There are one hundred and nineteen miles of 
four- and six-inch water mains, and the com- 
pany is opening other water supplies. 

Over these lines, well buried in the earth, runs 



PIPE LINES AND RAILROADS 99 



the company's fenced-in private motor road, 
for eighty miles, with surveyed right of way to 
the Tuxpan River, one hundred and twenty- 
five miles in all. 

There is no speed limit on a private line and 
the company's officials claim their trucks and 
motors do business over this road cheaper than 
the business could be handled on a railway; but 
be it remembered this company makes its own 
gasolene of sixty -three specific gravity, at a cost 
of less than a cent a gallon. 

The company also parallels this highway most 
of the distance, or to San Geronimo, by its own 
motor boat line and water route. From San 
Geronimo south it operates a thirty-five mile 
railroad to Cerro Azul, and has nineteen miles 
further surveyed for construction. It has also 
five miles of standard gauge road at Ebano; but 
not a passenger coach on any line. It is all busi- 
ness. The pleasurable way of travel in this 
country is by the company's motor boats, for 
it has a very complete line of marine equipment, 
including the yacht Casiana, usually at hand 
to take out all Americans when so ordered by 
the United States or Mexican de facto govern- 
ments. 

The company has been as far-sighted and 



100 THE MEXICAN PROBLEM 



ahead of its rivals in its Tampico terminals as 
in its oil land acquisitions. In tanks, storage, 
river-frontage shops, machinery, and loading 
equipment it holds the ground and leadership. 
I figure it has more oil in pipe lines and storage 
than it sold last year, and perhaps as much as 
its 1916 production — twelve million four hun- 
dred thousand barrels. 

The great pioneer work of acquisition, pro- 
duction, construction, finance, and organization 
has been accomplished in seventeen years, and 
the patient owner should reap handsome re- 
wards in the next seventeen years. 

A CAUTION 

But there is one caution I may give him, and 
that is not to be alarmed concerning reports 
from Mexico and Tampico, whence there is 
very little reliable news in the despatches of 
the day. Indeed, the two worst informed coun- 
tries concerning each other's affairs are those 
countries lying either side of the Rio Grande. 

The American hears little that is good or true 
concerning Mexico, and the Mexican hears little 
that is good or true concerning the United 
States. The governments of both countries 
seem equally interested in suppressing th^ real 







A CAUTION 



101 



news. Ali the foreigners interested in Mexico 
and. its development are afraid to speak con- 
cerning their properties or their operations for 
fear of misconstruction either at Washington 
or Mexico City, and harmless, inane, or weakly 
stupid news reports are allowed to pass censor- 
ship. We have all sorts of "frightful" German 
reports; now it is Villa moving on Tampico and, 
as I write, comes the report that shipping is 
tied up at Tampico by a strike of oil handlers. 
One would think, to read the press reports, that 
there was a similarity between the work of long- 
shoremen loading ships in New York harbor 
and thousands of Mexicans loading oil ships at 
Tampico. 

I stood at the loading-station on the east side 
of the Panuco River at the Mexican Petroleum 
Company's terminal opposite Tampico and wit- 
nessed one of the big oil ships slowly draw up 
to the wharf for its load of oil. There must have 
been a very large party on the pier, for it con- 
sisted of myself, two Mexicans, and Dr. W. W. 
Hills and his wife. The doctor was explaining 
to me his remedies for resuscitating the men at 
Cerro Azul when in the fumes of that gusher 
the American engineers were working day and 
night to shut in the torrent of oil, — how as fast 



102 THE MEXICAN PROBLEM 



as a man began to stagger he was grabbed by 
the doctor's assistants and quickly dragged away 
from the well so that the doctor might promptly 
restore him by gas antidotes, — and before he 
had finished his explanation the two Mexicans 
had moved a giant hose to the ship's side and 
the ship was being filled by gravity from a tank 
on the hill, some fifteen hundred feet away. 
The next day the ship departed with her sixty- 
five-thousand-barrel load. 

But what is the poor newsman to do with a 
press report when it arrives. It may or may 
not be true. In this case there was no strike of 
oil ship loaders, but for a few days there was 
trouble and a labor strike at the Pierce Oil re- 
finery and at the Mexican Eagle refinery, but 
the true news could not be given. Now, if you 
were a newsman on the firing line, would you 
send forth a report, if permitted, indicating de- 
lays in some oil shipments from Tampico, or 
would you wait till order had been restored, the 
censorship lifted and then telegraph a history of 
no value? 

NORMAL DISORDER 

The point, however, I wish to make for in- 
vestment interests should be clear. Mexico as 



NORMAL DISORDER 103 



a country is not in a state of normal peace, but 
of normal disorder — disorder that has prevailed 
more or less for a hundred years, except during 
the reign of Porfirio Diaz. Correct news reports 
are not readily available, and the business in- 
vestor should know his risks, should understand 
that he cannot be guided by newspaper reports, 
and should fully understand that Mexican values 
are selling at large discounts in the world mar- 
kets, but that in the end they will be properly 
demonstrated and properly protected by Ameri- 
can or European interests, and will some day 
be properly quoted. 



CHAPTER XI 



WHY THE PAN-AMERICAN COMPANY CONTROLS 
MEXICAN PETROLEUM 

American financial interests are now more 
keenly alive than ever before as respects their 
responsibilities toward investors. The opening- 
up in Alaska of the greatest copper bonanza the 
world has ever seen sent Kennecott Copper 
mining shares into the fifties and made a wide 
distribution. J. P. Morgan & Company and their 
associates might have been tempted to dispose 
of all their shares to the public and let the public 
take the risk of a continuation of the bonanza 
ore, which could be mined and marketed at less 
than five cents per pound when it was being sold 
at above twenty-five cents a pound. 

Morgan & Company, however, realized their 
responsibilities and sought insurance for Kenne- 
cott's future by acquisition of the Braden Copper 
mines of South America, which, when developed, 
will insure a large copper output at low cost, and 
also by acquisition of more than one-third of the 
shares of the Utah Copper Company, the world's 



CONTROL OF MEXICAN PETROLEUM 105 

greatest copper mine, whether measured by out- 
put or by earnings. It is no longer considered 
sound American finance for shareholders as 
partners to run away from each other, especially 
when the partners are the managing owners. 

The Mexican Petroleum Company has a bo- 
nanza in Mexico, the life of which no man can 
limit, but insurance of property in Mexico, and 
especially insurance of stability in political, 
social, and government conditions would carry 
a high premium rate. 

Mr. Doheny believed the best way to attain 
the desired insurance for an investment future 
for his associated interests in Mexican Petro- 
leum was to merge the control of the company 
in a new organization, which could open up a 
broad base of oil production in California and 
supply ships and shipping facilities for both 
California and Mexican oil around the world. 

It was also in contemplation at the time the 
Pan-American Company was organized to make 
combination with other oil companies that their 
oil distribution might be combined. At present, 
however, the proposed union with the Union 
Oil Company, the Associated Oil Company, and 
other oil interests has been laid on the shelf, and 
the Pan-American Company has started a very 



106 THE MEXICAN PROBLEM 



extensive development in California, opening up 
two big properties there, the Bell Ranch of 
ten thousand acres and the Ojai Ranch of eight 
thousand acres. 

THE INVESTMENT BASE 

While the Mexican Petroleum Company has 
$12,000,000 non-cumulative eight per cent pre- 
ferred stock, about $40,000,000 of common 
stock, and about $4,000,000 of bonded indebted- 
ness, the Pan-American Petroleum & Transport 
Company is organized with a large outline for 
expansion as occasion warrants. 

It has outstanding $10,500,000 seven per cent 
preferred stock, convertible into common at the 
rate of $115 par value for $100 par value of com- 
mon stock, but the amount of authorized pre- 
ferred stock is $25,000,000. It has an authorized 
common stock (par $50) of $125,000,000, but at 
present there is outstanding only $30,494,750. 

The Pan-American Company is the part of 
the enterprise expanding by ocean transporta- 
tion, California development, etc., and has in its 
treasury seventy-five per cent of the eight per 
cent preferred stock of the Mexican Petroleum 
Company and forty -five per cent of the Mexican 
Petroleum Company's common stock. 



THE PAN-AMERICAN m CALIFORNIA 107 

With its shipping interests it is in position to 
pay dividends upon its common stock without 
waiting for dividends upon Mexican Petroleum 
common. It will thus be seen that the invest- 
ment basis in this combined oil enterprise is in 
Pan-American and the speculation is in Mexican 
Petroleum. Indeed, it is figured that for Mexi- 
can Petroleum to pay more dividends than Pan- 
American, Pan-American must first pay sixteen 
per cent, or eight dollars upon its fifty-dollar 
shares. There is present expectation that Pan- 
American will begin dividends upon its common 
stock this year. The Pan-American Company 
has three sources of revenue and the Mexican 
Petroleum Company substantially one. 

THE PAN-AMERICAN COMPANY IN CALIFORNIA 

In southern California gasolene is used with 
great liberality. The broad state highways and 
asphaltum roads invite it. To visit the Bell 
Ranch of the Pan-American Company I took a 
little motor trip of two hundred and sixty -five 
miles, going from Los Angeles to Los Alamos, 
which is on the Bell Ranch property, and back 
to Santa Barbara in a day. I learned that four- 
hundred-mile motor trips for a single day were 
not uncommon in southern California. The 



108 THE MEXICAN PROBLEM 



ladies think nothing of going fifty or one hun- 
dred miles as a morning drive for a distant noon 
luncheon. 

Doheny bought the Bell Ranch for $1,800,000 
and turned it over to the Pan-American Com- 
pany. Boston people previously had an option 
on two thousand acres of this property at $1666 
per acre and forfeited on it. Doheny bought the 
whole for less than the previous price of a part. 
This was the largest untouched oil property 
in the State of California. Derricks are being 
erected here one thousand feet apart, or one der- 
rick to twenty-five acres. There are known to be 
four thousand acres of oil lands in the property 
and oil has been proven the full width at one end. 
The balance has not yet been proven. The whole 
is two and a half to three miles wide and seven 
and a half to eight and a quarter miles long. 
The Union Oil Company is on the west, the 
Standard Oil Company on the east, and on the 
north the Palmer Union brought in a fifteen- 
thousand-barrel gusher, for which, of course, 
they were unprepared, as gushers in California 
are not common. They shut it in and later found 
that it had departed as a gusher. Most of the 
California oil is obtained by pumping. It is 
expected that the wells here will do two hundred 



CALIFORNIA OIL STATISTICS 109 

barrels a day. Number 3 well was visited, which 
is down twenty-nine hundred feet and is doing 
one hundred and fifty barrels a day. Eleven 
derricks have been started. Oil sands here have 
about fourteen per cent porosity. The Union 
Oil Company pays eighty-five cents per barrel 
on the ground for oil and takes it into its own 
pipe line. 

SOME CALIFORNIA OIL STATISTICS 

The cost of a well and equipment here is fig- 
ured at fifteen thousand dollars, and at present 
prices for oil it may net forty-five thousand 
dollars the first year. Figures have been made 
that show possibilities of four hundred wells 
drilled on this property in two years to cost six 
million dollars, but to earn three times this sum 
per annum. This would be more wells than were 
ever drilled on any one property in the State. 

The Ojai Ranch, several miles farther south, 
cost about seven hundred and fifty thousand 
dollars. Oil was discovered in California in 1859, 
and Thomas A. Scott, of the Pennsylvania Rail- 
road, was interested in this property about 1865, 
but he was looking for kerosene, and the heavy 
oil found here was not then of value. Scott was 
interested in the first projected railroad from 



110 THE MEXICAN PROBLEM 



San Diego, and construction was begun there in 
the sixties, but no rails were ever laid by that 
railroad enterprise. When the Boston people 
came to build the Southern California road they 
avoided litigation by keeping outside the old 
Scott right of way. 

Senator Bard of California was interested in 
this Ojai property, and it is from the Bard Oil 
Company that the Pan-American now gets title 
to about two thousand acres of surface and all 
the mineral rights of the valley, about seven 
miles long and two and a half miles wide. On 
the Sulphur Mountain side of this valley are oil 
seepages that are declared to be the greatest in 
the State. On the other side of the valley the 
cleavage of the hills reveals the entire geological 
formation so that it can be followed for many 
miles. The oil in this territory varies from four- 
teen to thirty-four gravity and the wells are 
from four hundred to four thousand feet deep. 

PRODUCTION COSTS IN CALIFORNIA 

The average California oil well will yield from 
one hundred to two hundred barrels per day, and 
six hundred barrels is a big well. Oil wells run- 
ning from five to fifteen barrels have been auto- 
matically pumping in southern California for 



PRODUCTION COSTS IN CALIFORNIA 111 

many years — something of a contrast to what 
one sees in the Mexican oil field. Old oil wells 
are being remade here and new machinery will 
be installed and new wells driven. Well number 
36 on the side of Sulphur Mountain already fur- 
nishes a beautiful lubricating oil with gasolene 
and no asphalt. It is thirty-four gravity and is 
worth at the present time about two dollars per 
barrel, although most of the heavy oil in this 
district is worth about seventy-five cents a 
barrel. 

Whether an oil well is large or small, the cost 
of oil production at the well cannot be over ten 
cents per barrel; and oil can be pumped one hun- 
dred miles at a cost of one cent a barrel. 

The Pan-American people are at work on 
experiments to make a cheaper gasolene motor 
oil and also on improvements to the "cracking" 
process. Cracking oil is not a new invention but 
it is the basis of all the reports and promises from 
Washington for cheapening gasolene. A heavy 
crude oil is cracked by being heated to a tem- 
perature of eight hundred degrees under pres- 
sure with hot steam. Oil of eight and a half 
gravity is thus converted into an oil of sixteen 
gravity and will flow like water. In the process 
oxygen and hydrogen are separated and new 



112 THE MEXICAN PROBLEM 



chemical compounds are formed so that in re- 
ality a new combination produces a new and 
lighter oil. It is said that oil can now be cracked 
at a cost of three and a half cents per barrel. 

The Pan-American people realize the obliga- 
tion resting upon them to expand the market for 
oils in every possible direction. 

The report of the Federal Trade Commission, 
that found Standard Oil interests still dominat- 
ing the price of gasolene, should again emphasize 
how so-called anti-trust laws are responsible for 
the abolition of competition and really prevent 
the lowering of prices. 

The Washington report shows the division of 
gasolene marketing into eleven territorial areas, 
nine of which are said to be dominated by vari- 
ous Standard Oil companies, which produced 
more than sixty per cent of the gasolene in 1915 
and made sixty-five per cent of the total sales. 

I have always been annoyed in shifting my 
motor gasolene purchases from one oil company 
to another to find that very soon the price for 
my gasolene was regulated by the Standard Oil 
price and that, notwithstanding any market 
conditions or supplies, when the independent oil 
man had hooked me on as a customer he was 
very shortly giving nothing but Standard Oil 



PRODUCTION COSTS IN CALIFORNIA 113 



prices, yet claiming no connection with Standard 

on. 

I noted that in California gasolene had fluctu- 
ated from twenty-two to twelve and back to 
twenty, and in southern California I declared, 
"Here I shall find the truth," as gasolene is sold 
on street corners by more than a dozen inde- 
pendent producing and refining companies com- 
peting with more than one hundred Standard Oil 
stations. 

Yet when I inquired as to prices and conditions 
of competition, I found that prices were uniform 
and that competition was geographical — ■ a man 
bought his gasolene at the nearest gas corner. 
Gasolene users do not, as in the East, maintain 
underground gasolene tanks in or out of the 
garage to any considerable extent. They buy 
at the gas corner and it does not pay to run a 
car very far to buy its fuel. 

Throughout California, and most notably in 
Los Angeles, the most conspicuous store is the 
gasolene supply store. It is almost always on a 
corner vacant lot, often set in a small attractive 
garden, into which the car moves for its supply, 
the curbstones being cut down on both sides of 
the corner. These houses are one-story buildings 
of glass and wood, similar to the headhouse or 



114 THE MEXICAN PROBLEM 



potting-room of a green house. Roof and sides 
are painted conspicuously — the Standard Oil 
Company's always in red, white, and blue colors 
and other companies' in uniform trade-mark 
colors. All kinds of oil supplies are attractively 
arranged on the shelves within, and polite at- 
tendants in white suits remind you of a combi- 
nation between a certified milk dairy and a well- 
kept green house. 

COMPETITION BY SERVICE 

What interested me most was the problem of 
how all these corner oileries could compete with 
the Standard Oil Company, with its organiza- 
tion, system, and unlimited capital. I promptly 
found the answer — they did not compete at all. 
The Standard Oil Company fixed the prices and 
everybody else made the same price. There is no 
difference in gasolene of the same specific grav- 
ity, whether made by the Standard Oil Company 
of California or the Ventura Oil Company of 
Boston and Los Angeles. The California people 
brought up in the oil regions know the fraud of 
any advertiser who declares that his gasolene 
will carry a car more miles than the gasolene of 
his neighbor, if it is of the same gravity. 

The competition was entirely in the service 



INDEPENDENTS AND OIL PRICES 115 

and by location, and I was astonished that the 
Ventura and a dozen other companies could 
maintain oil supply stations over so wide a terri- 
tory in competition with unlimited capital. It is 
a matter of enterprise in management; but the 
prices are fixed by Supreme Court decisions 
and anti-trust legislation, both practically for- 
bidding price competition. 

Every oil producer and every oil seller knows 
without any argument what he is up against — 
that the Standard Oil Company can sell oil in as 
large quantities, as well refined, and at as low a 
price as he can afford and if need be a little 
lower. 

INDEPEKDENTS NOW HOLD UP OIL PRICES 

The safety of the independent, therefore, is 
the umbrella price of the Standard Oil Company. 
He cannot hope to cut out the Standard Oil 
Company business. He has neither the capacity, 
the supply, nor the capital for a contest of endur- 
ance. Self-interest requires that he sell at the 
same price. He cannot get more. He may there- 
fore hold his own by the location of his supply 
stations. If he attempts to get less he only lowers 
the general price and hurts himself and every 
other independent producer, and does not bring 



116 THE MEXICAN PROBLEM 



a frown or a wrinkle upon the face of smiling 
Standard Oil. 

The "trust octopus'* is seconded and sup- 
ported in price and service by all the independ- 
ents. Any one of them can put the price down if 
he wishes. In that case, his enemies would be 
the suffering independent producers and not the 
Standard Oil Company, which usually finds a 
still larger profit in lower prices and broader 
markets. 

The position of the Standard Oil Company is 
exactly that of the big copper producer, the big 
steel producer, or any other large vendor of a 
raw article. The producer knows, if he knows 
anything about business economics, that the 
advancing price restricts the consumption and 
a lower price enlarges it. What he wishes is 
the largest possible distribution consistent with 
profits. Distribution is governed by the minor- 
ity and the accumulation of supplies lowering 
the price which all producers are mutually inter- 
ested to sustain. At the lower price consump- 
tion is broadened, the supply is decreased, and if 
the leading producer does not advance the 
quotation, exhausting supplies will do it auto- 
matically. 

On an advancing market producers accumu- 



DON T ROCK THE BOAT 117 



late supplies which automatically check the 
advance. 

There is perfect action of the law of supply 
and demand at top and bottom, but intermedi- 
ately there is the law of self-interest placing the 
so-called trust and the independent upon ex- 
actly the same basis — mutual maintenance of 
price and profits; with competition only in 
service. 

"don't rock the boat" 

The Supreme Court decisions, the regulations 
by state and United States governments and 

anti-trust" laws, all pressing from the outside, 
force all producers into absolute mutual under- 
standing without any agreement written or 
oral. 

They absolutely boycott the government de- 
cree and that without conspiracy or combina- 
tion. They understand the law, "Don't Rock 
the Boat." 

When the government shakes its finger at the 
large company and tells it to compete and de- 
stroy the smaller companies and decrees aid and 
comfort to the smaller producing company to de- 
stroy the larger one, it makes impossible the com- 
petition which under the law it seeks to enforce. 



118 THE MEXICAN PROBLEM 



COMPETITION BOYCOTTED 

There is little difference in human action 
either side of the world. On the western side of 
the Pacific the Japs have attempted to dictate 
to unarmed China. The Chinaman does n't so 
much as wink. He just lays down his chopsticks 
and refuses to buy, serve, or eat a piece of Jap- 
anese fish, and the Japs see the point of distress 
and starvation before the Chinese feel it. The 
Japs threatening the Chinese make them a unit 
without other understanding than that of mu- 
tual self-interest. 

Throughout the United States the oil pro- 
ducers and selling agencies boycott the govern- 
ment edict and refuse to cut each other's throats 
in price competition. The Standard Oil Com- 
pany can laugh at all Supreme Court decrees. 
They continue to live under the law which by 
the same breath demands that they compete 
and destroy the small man and go to jail for 
doing it. 

The result throughout the United States is 
higher prices for oil; for when the Standard Oil 
Company had a monopoly, it had a responsi- 
bility concerning rising prices, and would con- 
serve supplies, pass them from surplus territories 



COMPETITION BOYCOTTED 119 



to exhausted territories, stimulate production to 
prevent erratic movements, and balance the 
markets to prevent wide fluctuations. 

Now the government has stepped in as a reg- 
ulator, and the Standard Oil Company has no 
responsibiHties; its valuations have multiplied 
fivefold, and Mr. Rockefeller is worth more 
hundreds of millions than he ever dreamed of, 
and this by legislative and Supreme Court de- 
cree and his own helplessness. 

Washington has decreed in the oil business, 
the copper business, and the steel business a 
capital socialism — where the weak protect the 
strong and the strong must permit it. 



CHAPTER XII 



DOHENY — LORD OF OIL 

More than sixty years ago two boys were born 
about twenty miles and three years apart in the 
State of Wisconsin. They were destined to be 
thoroughly American boys, but the parents of 
both were born in Ireland. One became Lord 
Shaughnessy, the head of the Canadian Pacific, 
and the greatest power for good to-day, both in 
war and peace, in the northern half of the North 
American continent. The other was Edward 
L. Doheny, lord of oil in the southwest of North 
America. Shaughnessy and Doheny, although 
bom in the same State and so near each other, 
and of parents from the Emerald Isle, never 
met until within a year. Yet for many years 
Shaughnessy had watched Doheny's progess in 
the Southwest, for Shaughnessy wants oil in the 
future for one hundred Canadian Pacific ships. 

I pen these lines in absolute independence of 
both, for if they had any power over me or any 
knowledge that I am writing this, the full limit 
of censorship against any personal encomiums 



DEVELOPED BY PLAINS AND HILLS 121 



would be placed upon me. I asked Doheny in 
Mexico what I might say concerning the situa- 
tion, and he replied: "Nothing about me or 
especially about my properties. We can take 
care of ourselves, but help the people of Mexico 
if you can." 

DEVELOPED BY THE PLAINS AND THE HILLS 

Edward L. Doheny is of public interest be- 
cause he spans in his life and activities the 
western pioneer, bivouacking on the prairies 
and seeking the development of wealth from 
the mountains and the plains, and the new era 
of heat, light, and power which is coming from 
mineral oil. 

When Doheny graduated from the high school 
in Wisconsin, he knew his botany and his miner- 
alogy like the American youth of advanced edu- 
cation; but to-day he knows it as do few people 
in the world. His life on the plains taught him 
to know the sage brush of the desert for its roots 
holding the sands against the winds and its 
blossom yielding up to the bees the most deli- 
cious honey. He knows all the flowers of the hills 
and the mountain side and he knows the rocks 
and the minerals they cover as do few men. He 
knows how these minerals were deposited, their 



122 THE MEXICAN PROBLEM 



dips, the sedimentary deposits, shales, and sands, 
and the basaltic and volcanic upheavals. 

He dwells in a garden with one of the largest 
collections of palms that any man ever gathered. 
He knows every palm whether he sees it in his 
garden or on the desert. Somehow he respects 
the botanical names of more than a hundred 
palms, probably because they have no common 
names, but he manifests a contempt for the 
geological names as applied to minerals. He 
declares that geological names never yet found 
minerals or oil, nor have the geological professors 
been very successful in directing any one how to 
find them. 

INDEPENDENT OF MAN OR BEAST 

For many years Doheny slept on the plains and 
in the mountains with his rifle by his side, and 
he always knew exactly where his boots were, 
where every piece of his pack lay and what were 
his resources and the journey before him. He 
never carried water or timber if he knew where 
to find it. But he carried the tools in his kit that 
could cut or file a piece of steel, mend a rifle, and 
insure him independence of any man or beast on 
top of Mother Earth. 

He believes that the minerals were originally 



INDEPENDENT OF MAN OR BEAST 123 



deposited almost universally on the earth's sur- 
face and were then ploughed by glaciers and torn 
by upheavals and leached and redeposited into 
cracks or deposits of various forms; yet you get 
them where you find them. But when you reach 
the end of the deposit, don't gamble too much 
money in looking for a continuation of that de- 
posit or for the next one. He says that when you 
dig a well and get water, you won't find oil, and 
when water comes in, that is the end of your oil. 

Frank A. Vanderlip, of the National City Bank, 
about a year ago paid a million and a half, or 
one hundred dollars an acre, for fifteen thousand 
acres covering the San Pedro mountain, an ocean 
point on the Pacific not far from Los Angeles. It 
has beautiful views from the hilltop into valleys 
both sides and out over the ocean. But Doheny 
had first looked at it for several days and paid 
one thousand dollars a day for the privilege. He 
found there were some oil seepages on the prop- 
erty, but the district did not indicate to his 
practiced eye that he could get his money back 
with a profit from either oil or land sales. But 
Doheny could slip over the mountains to the 
northeast and buy the beautiful Ferndale Ranch 
for another summer home for Mrs. Doheny, with 
its running waters, palms and orange groves. 



124 THE MEXICAN PROBLEM 



and consider it a good investment because it was 
worth it without regard to the oil derricks loom- 
ing on the hillside in the distance. 

SUPREME FAITH IN OIL 

Between the Ferndale Ranch and Sulphur 
Mountam we rested for a few moments to note 
the oil-bearing shale on the face of both moun- 
tains at the head of Ojai Valley; one dipping 
south and the other dipping north. Some of the 
party looked for trout in the brook, but Doheny 
noted a ten-inch curl of black oil ooze out from 
the spring by the brookside and flow down 
stream. 

"Look at that," he shouted. "That is worth 
more than all the trout in all the springs and 
streams in America. You can put trout in the 
stream, but you can't put oil in the ground." 

Then we passed on through the cypress and 
the yew trees and filled our pockets and mouths 
with sun-kissed oranges, and then down the 
valley of the Santa Clara, noting the oil derricks 
on the south mountains across the valley, some 
of them belonging to the Ventura Oil Company 
and some of them to Doheny, for Doheny's in- 
terests in California about equal his interests in 
Mexico. 



SUPREME FAITH IN OIL 125 



The main ranch or home farm of Doheny is 
ten miles out of Los Angeles, eight hundred acres 
on the mountain side, and still it is not the ex- 
tensive gardens, orange groves, fish hatchery, 
duck ponds, cemented driveway up the moun- 
tain, or his developed underground river, or the 
beautiful blue lilac bushes, that interest Doheny 
to the greatest extent; nor yet the opportunity 
here for a vigorous outing, a seven o'clock break- 
fast, and a beautiful view across the valley. It is 
the little seepage of oil in the sidewalk that in- 
dicates that again Doheny sits atop of wealth 
that he can sometime at his good pleasure mint 
into gold and human uses. 

Doheny not only knows men, but he believes 
in men of the right sort. T. A. O'Donnell, a 
director of the Pan-American Oil Company, 
Doheny declares to be the best oil operator in 
California. He says he will get twice as much oil 
out of a well as other operators. When an oil 
well stops with O'Donnell it is going again in an 
hour. With some other people an oil well may 
be going again within two or three days, but 
the fellow that keeps his oil well going will get 
the oil, because the oil is all the time flowing 
toward him. 



126 THE MEXICAN PROBLEM 



YOUTH AND ENTHUSIASM STILL WITH HIM 

Doheny is an enthusiast. When he goes into 
a thing, he is in all over, hands and feet. He will 
travel longest with the swiftest and the strongest, 
swim or ride with the youngest, and sleep more 
or less in any part of the twenty-four hours. He 
will absorb more and his interest and his sym- 
pathies will be of the broadest because his stud- 
ies and his sympathies reach from the stars of 
heaven to the lowest mineral deposits and his 
interest is all the while in humanity and its on- 
ward progress. 

In the forenoon, over on the side of Sulphur 
Mountain, he dipped his fingers in the thirty- 
four gravity oil oozing from well Number 36 and 
exclaimed enthusiastically: "Isn't that fine.^ 
Is n't it better than soup or something to esii? 
Just smell it! It is a soft, lubricating oil with no 
asphaltum." And he dipped up a pan of it and 
we all had to note it, smell it, and admire it. 
Then he took a wisp of oil waste from the auto- 
mobile and wiped his hands as clean as those of 
a woman and was off in the motor to dip into 
another oil well and note its color, its thickness, 
and its gravity. 

As I write this in the East, comes the report 



EARLY IN BUSINESS m 



from that Number 36 oil well that its flow has 
increased to twenty-five barrels a day; and it is 
just what Doheny said it was, — pure, lubricat- 
ing oil, with no asphaltum, but a little higher 
grade at thirty-seven gravity. 

EARLY IN BUSINESS 

At seventeen years of age Doheny was with a 
United States government surveying party in 
the Indian Territory. As a side line, he took 
to trapping wild animals. Many a wolf-skin 
he cashed in at the trading-post, but he early 
showed his independence. When trapping one 
winter with a friendly Indian, one of Doheny 's 
pelts was claimed as taken from a wolf nearest 
the Indian's trap. Doheny protested. He said 
the hunting law might well be that a dead ani- 
mal belonged to the nearest trap, but snow on 
the ground showed that that animal came from 
his, Doheny 's, trap. 

The Indian stood by the law and Doheny 
stood by the fact and they separated. Doheny 
declared that no rule of the hunt could give his 
kill to another trap when it was clearly shown 
by the snow tracks it did not belong there. 

Doheny was soon again in business for himself. 
With a partner he bought at auction over sev- 



128 THE MEXICAN PROBLEM 



enty head of government horses for about five 
dollars each and drove them into Kansas; and 
all through the summer months he was break- 
ing in the horses and selling them to farmers 
at twenty-five dollars a head. Doheny and his 
partner felt sure they had done the greatest 
stroke of their lives. Each then thought that if 
he could get an income of one thousand dollars 
a year he would be rich. 

But the lure of the mines followed the lure of 
the forest, and Doheny was soon up north pros- 
pecting for gold, and for many years he mined 
and prospected through the Rocky Mountains, 
especially in New Mexico and Arizona. He was 
running a good sized mine in New Mexico and 
making ten dollars a ton when the McKinley 
tariff put him out of business. 

His ore had a value of about fifteen dollars a 
ton, and he could smelt it at El Paso at five 
dollars a ton and get ten dollars a ton profit. 
The McKinley tariff put a duty on lead ores and 
made Monterey in Mexico the greatest smelting 
center in the world. The El Paso people could 
not get their lead flux except at heavy duty and 
therefore had to charge Doheny fifteen dollars 
a ton. 

This sent Doheny to southern California. His 



NO GAMBLING 



129 



quick eye detected some black stuff being 
hauled over the streets to a furnace. He made 
investigation, and soon he and Canfield had 
leased ground and with shovel and hand wind- 
lass were opening the Los Angeles oil field. It 
was hard work and there was a long fight ahead 
of them, but they won out and the Los Angeles 
oil field proved up exactly what Doheny had de- 
clared it would yield; and many of Doheny 's 
old Los Angeles wells are still automatically 
pumping. 

INTO OIL 

This was Doheny's first venture in oil, and oil 
has been in his blood and bone ever since. 

Doheny is distinctively a prospector and not 
a gambler. He would not play a game of cards 
for a ten-cent piece. He never took a drink in 
his life, and he never smokes. But as a prospector 
he will hit the rock and do his drilling to the end 
of the lead; but when he reaches the end, the 
prospect is determined and no blind gambling or 
groping in the dark follows — he quits. 

NO GAMBLING 

I could take you to one place in California 
where the Standard Oil Company has spent 



130 THE MEXICAN PROBLEM 



$2,500,000 with not a cent to show for it. 
Doheny was previously in that district and it 
cost him just $8000 to put down his well and 
learn that any further expense would be gam- 
bling. He had paid his $8000 and gotten his 
information. The Standard Oil Company put 
$2,500,000 in the same district later and still 
has no further information. 

But just afterwards Doheny heard of a prom- 
ising piece of oil land offered for option. He in- 
quired and learned that an adjoining property 
was known to be better. He took a third ob- 
servation and learned that the cream of the 
district was held for $2,250,000, while the poorer 
part could be had for one or two hundred thou- 
sand dollars. He promptly took the option on 
the best part, paid down his ten per cent, drove 
his wells and paid the balance, $2,000,000, out of 
the product from the wells. He quit that district 
$8,000,000 to the good. 

Then he opened another district and took out 
another $8,000,000. He was the pioneer in the 
Bakersfield district, drilling the first well and 
selling the first product from the district. In the 
early days of Bakersfield he was selling oil at 
$1.25 a barrel to twenty-one other drilling out- 
fits. With the two oil fields he is now opening up 



STANDING BY 



131 



for the Pan-American, Mr. Doheny will have 
opened up eight oil fields in California. 

STANDING BY 

From the FuUerton and other districts in 
California he got the money to make his start 
in Mexico, where at the beginning he had only 
an eight per cent interest, but assessments of 
$750,000 from 1902 to 1905 did not trouble him. 
When the Texas oil gushers made Mexican oil 
practically worthless for a few months, Doheny 
stood by, just as Rockefeller did in Cleveland, 
and bought when nobody else would buy, believ- 
ing that the future would demonstrate the val- 
ues. Doheny's Mexican Petroleum interest went 
up to nearly forty per cent as his associates sold 
out. 

Doheny has always stood by. In the panic of 
1907 he kept millions on deposit that his prop- 
erties might be protected against any accident. 
Five years ago he disposed of some properties for 
more than $10,000,000, and half of the money 
went into Mexican Petroleum. I don't think that 
he values his Mexican interests financially as 
high as his California interests, but the social 
problem in Mexico interests him more and takes 
greatest hold upon his sympathies. 



132 THE MEXICAN PROBLEM 



Tampico was a cattle shipping point with less 
than , twenty thousand people when he began 
operations there. To-day it has a population of 
fifty thousand, and wages that were twelve and 
one-half cents are now one dollar for ordinary 
labor and three dollars and fifty cents gold for 
skilled labor. When in June, 1916, nine hun- 
dred refugees were taken from Tampico on two 
tank steamers and the yacht Casiana, the ex- 
pense was sixty-seven thousand dollars and the 
American government offered to repay, but 
Doheny refused to accept. From October 14, 
1915, until April 15, 1916, there was famine in 
that land for the native population. The war- 
ring forces had taken all the food out of the 
country and sent it to Vera Cruz, whence it had 
been shipped to Texas and sold for war supplies. 

Doheny bought it in Texas and shipped it 
back in the same packages to Tampico and fed 
the native Mexicans with it so far as the Ameri- 
can consul certified they had need for food. 

Doheny is a delver in statistics, and these 
ground him in his faith in the great future for oil 
in the uses of the world. He believes that the 
time will arrive when coal locomotives can be 
used profitably only in the coal regions. It has 
been demonstrated that an oil-burning engine 



1- 

•i 



STUDIES PAST, PRESENT, FUTURE 133 



can carry a train from New York to the Pacific 
Coast and back to New York without refueling. 

Of course the expected railroad development 
in the oil line cannot take place during the war 
time, when the American oil reserves are being 
drawn down two million barrels a month. Never- 
theless, oil-burning locomotives are operating 
in twenty-one States on fifty-three roads, and 
on thirty-two thousand miles of road, and con- 
suming forty-two million barrels of oil per an- 
num. 

STUDIES PAST, PRESENT, AND FUTURE 

It is not only oil in the future and the man in 
the future that interest Doheny, but the oil of 
the past, the man of the past, and the animal 
and mineral life of the past. 

Five years ago Doheny and Canfield used to 
note deposits of bones in asphalt about eight 
miles out from Los Angeles, whence tons of 
asphalt had been taken for road making. " What 
a fool rancher to lose so many sheep in tar beds," 
they said; "why did n't he fence out the sheep.? " 
Then somebody noted that there was not a 
sheep bone in the lot. In came the scientists 
to solve the riddle. 

Now bones of the elephant, the ground sloth. 



134 THE MEXICAN PROBLEM 



the mastodon, the bison, the horse, the camel, 
the bear, the coyote, and the giant wolf are 
mounted or are being mounted for the Museum 
of History, Science and Art in the Exposition 
Park of Los Angeles, and there are fifteen thou- 
sand boxes of bones still unassorted. As many 
as thirty skulls of the saber-tooth tiger or cat, 
together with fifty skulls of the giant wolf, 
were found in a space of less than four cubic 
yards. 

Mother Earth here hermetically sealed up 
the animal life of many hundred years ago, and 
the museum and the ranch La Brea, of twenty- 
five acres, now the property of the State, will 
be of interest to the scientist and the student for 
many hundred years to come. From this place 
came the skull and skeleton of a woman eight 
thousand years old. Many animal contests 
must have occurred about this water and tar 
hole, for animal bones are found chewed, and 
some partially healed. 

To Doheny, the man of the plain and the 
mountain, deep and broad delver in Mother 
Earth, these bones, the life of the past they re- 
veal for man, — beast and vegetable life, — have 
the deepest interest; for Doheny seems to have 
the genius's insight into the history of the past, 



WATCHMAN! WHAT OF THE NIGHT? 135 



the meaning of the present, and the hope of the 
future. 

Yet Doheny does not work altogether by eye- 
sight. His associates note that he will not make 
important moves on the chessboard of business 
until the time or something within him seems 
to be right, and then he moves swiftly, surely, 
and independently. But until the spirit moves 
within him, nothing can stir him. 

WATCHMAN! WHAT OF THE NIGHT? 

Working within his soul at the present time 
is the question of the future of Mexico. He can- 
not see it clearly. He can see Los Angeles, in 
the center of the uncounted wealth of southern 
California, reaching toward a million popula- 
tion, and note the meaning of an automobile to 
every five people in the town. He can rejoice 
as telegrams come from Tampico reporting that 
the dredging and the river current in the three 
months this spring have deepened the bar chan- 
nel from seventeen feet to over twenty-six feet. 
He is pleased that men of Tampico are now 
getting more than ten times the wages per 
day they received before he went there. He is 
happy to note that every one of them was so 
well cared for at the Mexican Petroleum Com- 



136 THE MEXICAN PROBLEM 



pany terminal that, when in April the I.W.W. 
workers stirred up revolt in four oil refineries at 
Tampico, there was not a whisper of trouble 
among his men. They told me at the Tampico 
terminal that under proper direction, with good 
food and care, the Mexican workers could be 
relied upon for anything, and in an emergency 
would work thirty-six hours or forty-eight hours 
on a stretch with their meals brought to them, 
and that they were loyal and true. 

What troubles Doheny is how these good peo- 
ple of Mexico, speaking one hundred and fifty- 
three tongues, can be merged into a nation, 
with soul life, prosperity, and family and na- 
tional happiness. 

That is the Doheny problem! That is the 
United States problem! That is the Mexican 
problem I 



THE END 




Scale of Miles 



CAMBRIDGE . MASSACHUSETTS 
U . S . A 



